Market outlook – July 2023

“Don’t always trust what you see. In a bull market, even a duck looks like a swan”.
– Vijay Kedia (Indian Investor, entrepreneur, philanthropist, founder of Kedia Securities)

The month of June presented a blockbuster rally in the Indian stock market, that led both the NIFTY-50 and BSE-Sensex to climb to their all-time highs, not once, but thrice. The NIFTY-50 traded near the 19,300 mark and Sensex surpassed 65,000, as the month ended on the back of strong inflows from foreign institutional investors (FIIs), robust corporate balance sheets, moderating inflation and growth picking up coupled with expectations of a normal monsoon season, all of which bolstered the sentiment of market participants.

Positives in June:

  • US Fed pauses rates after more than a year of consecutive rate increases.
  • Oil Prices drops below 70$ per barrel, despite Saudi cutting oil production.
  • Retail inflation eases to 4.25% in May; April IIP rises sharply to 4.2%.
  • GST Collection Rises 12% to INR 1.61 Lakh Crore in June 2023
  • FIIs pumped in 27,250 Cr in Indian markets, 4th consecutive month of net buying.
  • Monsoon covered entire India and has been expected to remain normal in July.
  • HDFC-HDFC Bank Merger makes it world’s 4th largest bank based on market capitalisation.

Threats ahead:

  • Fed further hiking rates in July meeting.
  • Progress of the monsoon in the country considering any delay or below than expected monsoons can impact the rural recovery.
  • Rise in inflation due to subpar rainfall. (Tomato Prices already above 150)
  • Poor Q1 Qtly results, making stocks expensive.

Difference between Markets touching New High & Being Overvalued:

Though markets have touched new highs, valuations are still lower than the previous time the index traded at the same level (in Nov’22), on account of compounding of earnings in the interim.

Due to better-than-expected company results, Earning Per Share of companies have improved across the board, resulting in cheaper valuations despite markets breaking previous high.

Hence one should not panic, and press the sell button or profit booking, just because a new high is made. We expect revenues to improve in Q1FY23-24 and further improve valuations. Crude oil sticking to lower levels despite oil production cuts from Saudi, due to expectations of weaker demand will further fuel the growth of Indian stock markets.

Asset allocation strategy is always the key to generating alpha (or higher returns) over traditional method of investing. It usually offers following benefits:

  • Control & command over your portfolio.
  • Better tracking of valuations, hence decision for switching for profit booking or value investing becomes easier.
  • Curtailing of number of schemes in your portfolio, from many, to few, making tracking easier.

Therefore, we suggest, one should revisit their respective portfolios and discuss same with their RM’s or advisors to know more on aligning the portfolios with the best asset allocation strategy available.

Happy Investing!

Mushtaq Kazi
Mushtaq is the co-founder of Mushtaq has had corporate stints with Kotak Securities & IIFL group. He holds an MBA degree from Pune University.
His interests include cooking & gardening. When he is not cooking or gardening, he is writing.