Market Outlook – March 2024

“Markets are strongest when they are broad,
and weakest when they narrow to a handful of blue-chip names.”

Nifty index started the February month on a positive note, and follow up buying was intact, as it kissed a fresh all time high of 22,441 zones. Some volatile swings and profit booking was seen at higher zones, but overall Index is holding it support zones. Large & Mid-Caps continued its rally while profit booking was seen in Small Caps. On the sectoral front we have witnessed buying interest in most of the sectorial indices mainly in Realty, Energy, PSU Banks, Pharma, Auto, IT and Metal sector.

Key events so far:

  • Fed indicated it will not hurry in cutting rates, delaying hopes for early rate cuts. The next US Fed meeting is scheduled on March 19-20 and would provide cues into global interest rate direction.
  • Indian Economy Grows By 8.4% In Dec Quarter Driven by Construction, Manufacturing Sector. India’s GST Collection Rises 12.5% To Rs 1.68 Lakh Crore in February. India’s Retail Inflation Eases To 5.10% In January 2024.
  • SEBI Flags Froth in Small Cap, Mid Cap Stocks; advises AMCs to conduct and disclose stress test and figure out measures to tackle situations when the test results indicate red flags. SEBI also announces T+0 Settlement by March 28.
  • Gold prices touches record high of Rs 66,270/- per 10 gm. Brent Crude hovers in the range of 82-83$ per barrel. The rupee rose slightly to settle at Rs 82.88 against the US dollar. Bitcoin bounced back sharply to hit all-time highs of $72K.
  • DIIs recorded the seventh consecutive month of inflows at Rs.25,379 crore, while FIIs were net sellers of Rs.15,963 crores.
  • Equity mutual funds inflow increased by 23% in February to Rs 26,866 crore. February 2024 SIP inflows at ₹19,187 Crore; as SIP folios cross 8.2 Crore.

March Outlook: Nifty is trading at a 12-month forward P/E of 19.5x, which is in line with its 10-year average, even as broader markets trade at expensive valuations (NSE Midcap 100 is trading at ~33% premium to Nifty). Hence, we expect the large caps to outperform the mid and small caps in the near term. March overall is known as sluggish month for markets. Advance Tax payments, Tax Harvesting, Profit booking all leads to correction.

Markets in the near term, would take cues from economic data, announcements relating to the upcoming Lok Sabha elections, and the timing & quantum of easing in the interest rate cycle, both globally and in India.

We expect a healthy 5-7% correction broad based in markets in March. Hence, we recommend allocating 100% in Debt funds at present. Moreover, we do not expect a long-term correction, and only a sharp short one, good enough to renter at lower levels which will enhance portfolio yield by 4-5%, even if markets underperform the whole year.

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.