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Market Outlook – Nov 2021

Nifty & Sensex touched a new high of 18604 & 62245 respectively in Mid-October but had a sharp correction by the month-end. Nifty & Sensex fell 5% each. Large Caps corrected 5%, while Mid & Small Caps corrected 8% each. Valuation wise, these figures are in the overvalued zone and needs correction, which has started.

Reasons for correction:

  1. Fed Policy meet on 3rd November, for the start of tapering.
  2. Big IPOs like Paytm, Policy Bazaar squeezing 27000 Cr liquidity from the market.
  3. Markets rebalancing itself as per 2nd Quarter results.
  4. Oil breaching $100 mark again.

“If GREED & fear had to own one stock market globally for the next ten years, and not be able to sell it during that period, that market would be India,” – Christopher Wood, global head of equity strategy at Jefferies, wrote in his latest weekly note to investors GREED & fear.

“Any sell-off in Indian equities, triggered by tapering/ tightening scare on Wall Street will provide opportunities to add to Indian equities, most particularly if this coincides with a further likely rise in the oil price on an accelerating re-opening of the global economy,” Wood wrote.

Shaktikanta Das has been given an extension of another 3 years as RBI Governor, hence expect no major rate hikes as he is expected to toe Govts line in keeping a low-interest rate regime.

FIIs now have been the net sellers in the last 7 consecutive months, while DIIs are the net buyers, retail participation has grown considerably and again played a big role in the current rally. Post correction it is recommended to shift around 10% from Debt to Equity in this month.

Wish you & your loved ones a Happy & Prosperous Diwali!

Market Outlook – Oct 2021

Nifty & Sensex both touched a new high of 17947 & 60412 respectively in Sept. Nifty PE is trading at 27.34 multiple and Sensex is at 31.51 multiple. Valuation wise, they are in the overvalued zone and needs a correction, which has started. Nifty corrected 500 points last week & Sensex 2000 points.

Reasons for correction:

  • Fed indication of the start of tapering from November.
  • China’s biggest real estate developer Evergrande defaulting on interest payments.
  • Power cuts in China due to rising coal prices & shortage for the same.
  • Energy Crisis in Europe due to sharp rise in gas prices.

All the above reasons are global and nothing local. Manufacturing PMI rose to 53.7 from 52.3 and Inflation reduced from 5.59 to 5.3. 89crore vaccination doses have been given so far. Most of the lockdown restrictions are removed and schools & theatres were granted permission to reopen. With the festive season setting in, huge pent-up demand is expected to come up in the coming months.

FIIs now have been net sellers in the last 6 consecutive months while DIIs are net buyers, retail participation has grown considerably and played a big role in the current rally. A staggering 11 million new Demat accounts blew through the previous year’s record of 4.7 million accounts, and by almost double at that. IPO market will see 17 Companies tapping the market with 30,000 Cr worth of new issue. Emcure Pharma, Nykaa, Mobikwik & Star Health will be the big ones.

As Expected, tax filling dates has been extended till 31st December 2021. Tax Filling glitches still exist, delaying the whole process. Post further correction, it’s recommended to shift a portion of the Debt portfolio to Equity this month. Speak to your advisor to know more.

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Market Outlook – Sept 2021

Nifty & Sensex crossed a new high, crossing 17k & 57K respectively. We had expected this figure by Diwali, but the market surprised all investors with an early Diwali Gift. This was the fastest jump ever, completed in mere 28 days’ time.

Reasons for this rally:

  • Strong Q1 numbers & an expected even better Q2 numbers across all segments.
  • Fed Powell going soft on tapering, giving new energy to bulls.
  • Record Vaccinations, almost half of population covered with 1st dose.
  • Strong retail participation, never seen before.

Revised average target of Nifty by many brokers is now around 18.5k by Nov-Dec 21. Since Mid & Small Cap segments had seen a decent correction, it’s an ideal time to shift Debt allocation (around 10%) to Mid & Small Cap schemes this month. Due to the lack of any major negative news, we expect this rally to continue and touch new highs.

Only Threat: Possibility of third wave hitting early.

FIIs now have been net sellers in the last 5 consecutive months, while DIIs are the net buyers, with retail participation growing considerably and played a big role in current rally. IPO markets will see 9 Companies tapping the stock market with 12500 Cr worth new issues. Aditya Birla Sunlife AMC and Utkarsh Small Fin Bank will be the big ones. Tax Portal Bug: Infosys had been given the contract to launch new website for Income Tax Filling, wherein most of the data like capital gains from shares & mutual funds would have been automatically captured and filling would have become simpler. The new website was launched but with a lot of bugs making it impossible to file tax returns. Finance Minister Nirmala Sitharaman had given Infosys deadline of 15th Sept to resolve the issues and make it work. Tax Fillings for clients had been delayed and most probably there will be an announcement of the extension of filling date deadline soon.

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Market Outlook – Aug 2021

The stock market has been range-bound in July, with Nifty hovering in the range of 15600 -15800. Quarter numbers (Apr-May-June-21) were better than expected, led by IT, Cement & Consumer sector, while the Banking sector has been the worst performer (with below par results).

Overall View: after a strong FY21, earnings for FY22 have begun on a healthy note. 1QFY22 earnings are progressing in line thus far. The damage from the second COVID wave and the consequent lockdowns in April/May’21 has been much lesser than that from the 1QFY21 national lockdown. Management commentaries across the board suggest an improved demand environment post-June ’21, led by the easing of restrictions, lower active COVID-19 cases, and a pickup in vaccinations. However, the impact of rising commodity costs and, in general, higher inflation is reflected in the P&L. Asset quality in Financials has expectedly weakened sequentially. We estimate corporate earnings to continue to recover, as the underlying economy opens up, with progressively higher vaccination trends.

FIIs have been net sellers in the last 4 consecutive months, while DIIs are net buyers, a matter of concern, but expecting FIIs buying to resume soon. The IPO market is hot with bumper listings of Zomato, Clean Science & Technology, Tatva Chintan & GR Infra. Next few months, many IPOs are lined up – Devyani International (KFC / Pizza Hut), Policy Bazaar, Car Trade, Fino Payments Bank, Star Health Insurance, Paytm, Mobikwik, NSE, etc.

The RBI’s MPC meeting is scheduled for the coming week, however, the expectation is that the RBI too, just like the Fed, will not hamper the repo rates, so as to continue supporting impacted sectors with cheaper credit.

Positives: Healthy Q1 Earnings, High Liquidity, Reducing COVID Nos, High Vaccinations, Good Monsoons, easing of Restrictions, long Festive season, and Pent-up demand buying.

Negatives: Possibility of third-wave due to highly dangerous delta virus, and rising inflation.

Clearly, the Positives outweighs the negatives. Therefore, one can look at shifting a chunk of the debt allocation to equity, in case the market corrects further.

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Market Outlook – July 2021

Nifty has risen over 13 percent so far in 2021, and over 50 percent in the past year, soaring to the peak of 15,915 on June 28, 2021, but it seems bulls may be losing steam and the market would be prone to volatility, going further.

If the momentum continues, the next target is 16,800 – 17,000 in the next 6 to 12 months, but the journey would not be linear like it has been for a year, as most of the good news, be it vaccination, earnings, or economic recovery, is already priced-in.

FII’s have been the net sellers in the last 3 consecutive months, while the DIIs are the net buyers. The IPO market is hot, with 5 companies lined up to hit the primary markets, including Zomato, Glenmark Life Sciences, Clean Science & Technology, Krsnaa Diagnostics, GR Infra and Shriram Properties.

Key events to watch for will be the 1st quarter results, starting with Infosys, which is expected to deliver a strong performance. Banking & Financials will be the key sector to watch, as NPA numbers are expected to rise further. Retail Inflation in India is at 6.3% in May, crossing the RBI’s threshold, making commentary from RBI Governor interesting in the August Policy Meet, though he is expected to keep the status quo (on the rates).

We expect a strong performance from across sectors, the high valuations will be justified post the Q1 results. Hence July brings an opportunity to shift the Debt allocation to Equity, keeping us well prepared and ready for the next jump. The current weakness in markets should be used to timely shift at lower levels, though not much fall is expected.

Happy Investing!

Market Outlook- June 2021

Warren Buffett once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful”.  Current market is an absolute reminder of the above quote.

Sensex & Nifty have touched record highs and still going strong. Globally, mobility and economic indicators are showing a recovery. Strong growth, loose policy, and excess liquidity are boosting global equity markets to all-time highs. India has also crossed the milestone of $3 trillion market capitalization. Due to the impact of Covid in the April-June quarter, India’s FY22 real GDP growth estimates are being downgraded by 2.0%-2.5%. However, the 2nd Covid wave has peaked out (more or less) and the pace of vaccinations is rising with improved supply. So, India’s economic recovery should come back on track by FY23.

FIIs have been net sellers in June but expected to come back strongly in 2nd half of this year. Till then strong domestic flows and increased retail participation should support markets. Any correction should be temporary and minor. However, short-term upside may be limited, and the market are likely to remain range-bound.

Strong numbers from Large Cap Stocks have justified their valuations and hence their allocations have been increased this month. Mid-Caps have also been catching up fast. Small Caps are in high-risk zone and hence allocations for that segment is not recommended at present.

Since RBI will not further decrease rates and inflation is expected to rise, most likely the interest rates may go up in the future. Hence Debt funds may also need allocation change, from PSU & Banking to Floater or low duration funds.

Considering current & future scenarios, equity to debt portfolio allocation needs further restructuring and should be in sync with the changing market dynamics. It is advised to be in touch with your advisors towards same. Happy Investing!

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Market Outlook – May 2021

For the month of April, domestic equity markets rose on the back of brisk buying in the banking and finance segments. Upbeat earning numbers for the quarter ended Mar 2021 boosted the market sentiments, after a major private sector bank reported strong earning numbers. Positive global cues further added to the gains, after the U.S. Federal Reserve kept interest rates unchanged in its monetary policy review and re-affirmed its accommodative policy to support the economic recovery.

However, profit booking capped the gains to some extent. The overall market sentiment also remained muted as a devastating second wave of the COVID-19 pandemic showed no signs of abating with the country continuously reporting a record surge in daily infections.

Markets to remain sideways this month with Nifty range of 14200 – 15200. State elections are done and dusted, hence Govts full focus will now be on COVID control. Vaccinations above 18 age have started and if States are able to conduct this drive successfully, the market is going to touch new highs in coming months. 

Recommended to start accumulating stocks. Pharma, IT, Cement & Chemicals, as being quick runner segments. We suggested building equity allocation on a partial basis monthly, to accumulate or shift debt assets towards equity. Speak to your advisors for a guided experience.

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Market Outlook – April 2021

Equity Market

Markets remained sideways in the month of March-2021. Nifty remained range bound in the range of 14500-15000. The two key risks for equity markets in an intensified second wave of Covid and continued surge in global yields have materialized together over the past few weeks. This expectedly caused turbulence for stocks as the Sensex and the Nifty corrected nearly 7% and 6.5% respectively from recent highs before mounting some recovery.

While the second wave continues to be a cause of worry, it has not led to any major curb in activity so far as lockdowns have been very localised and much less stringent. With the understandable reluctance to lock down on the part of authorities, better preparedness on medical infrastructure and continued pick up in the pace of vaccination, the economy can still manage to stay largely unscathed this time barring some impact on the services sector.

The week gone by also saw US president Biden pushing through on his election agenda of a redistributive fiscal policy. He proposed a $2 trillion infrastructure plan that should help create jobs and proposes to partly finance it through an increase in corporate taxes. He is also expected to announce a somewhat similar magnitude in part 2 of his plan focussed on ‘human infrastructure’ which is expected to be financed through higher personal taxes. With a slim majority in the Senate for democrats, the extent to which these proposals will see the light of the day is uncertain as of now. But directionally these proposals continue to strengthen the prospects of a global reflation, and that should be a tailwind for emerging market equities including India.

Investors will also await the start of the March quarter earnings seasons from this week as they expect another quarter of bumper bottom line growth. Here too commentary from management on the 2nd wave will be keenly watched.

With profit booking in the previous months, one can look at allocating funds gradually now, towards building equity in mutual funds, as well as stock portfolios. Speak to your advisors on your portfolio building.

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Market Outlook – March 2021

Markets took a pause in February, after touching record high, post budget. Domestic equities ended in the negative territory. S&P BSE Sensex and Nifty 50 fell, 3.5% and 3%, respectively.

Concerns about the recent spike in the number of Covid-19 cases back home and weak global cues, including rising global bond yields, especially in the US, dented the market sentiment. However, further losses were restrained on optimism that vaccine rollouts across various parts of the world will allow a swift global economic recovery. Finance Minister Nirmala Sitharaman’s announcement that the government has lifted the embargo on grant of government business to private banks induced further buying by investors.

India’s Gross Domestic Product (GDP) for the October-December 2020 quarter grew by 0.4%, while the GDP for the entire financial year 2020-21 (FY21) is seen contracting 8%. India’s fiscal deficit widened to Rs 12.3 lakh crore in January, representing 66.8% of the target as per the revised estimates (RE) for FY21. India’s core sector growth came in at 0.1% in January against 0.2% expansion recorded in December.

The Cabinet approved the production-linked incentive (PLI) scheme worth Rs 15,000 crore and Rs 7,325 crore for the pharmaceutical and technology hardware sectors, respectively, to encourage domestic manufacturing.

Crude oil prices rose sharply, due to a drop in crude output after a deep freeze in Texas disrupted production last week.

As mentioned in the February market outlook we have advised 50% profit booking in equity and suggested shifting the same to Debt. We expect further corrections this month, which may allow one to re-enter or shift Debt gradually back to Equity. We also recommend (to start) building an equity stocks portfolio, in a gradual manner, buying on every dip.

Happy Hunting!!!

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Market Outlook – Feb 2021

January 2021 was a month of record highs. Sensex scaled 50K for the first time, and Nifty50 at a kissing distance to touch 15K. Budget 2021 got a big thumbs-up from the stock market, with Sensex jumping record 5% up, on a single trading day.

The Union Budget was tilted more in support of the Growth, even at the cost of higher borrowing. Government increased focus on infrastructure and no Tax rate hikes (as expected) cheered the market. The Budget is aimed at supporting employment and businesses by spending, rather than worrying about near-term fiscal position. Economic environment is becoming more conducive for a business cycle recovery. We continue to remain positive on sectors which are closely linked to the economy like Banks, Capital Goods, Infrastructure, Metals/Mining etc.

We believe the current market rally may continue till the below mentioned triggers play out: a) US acknowledging inflation & in conclusion pausing stimulus, b) US Treasury Yields reaching 2%, & c) Crude Oil touching 60-65$/bbl, which may lead to high inflation.

By Historical standards, Indian markets are highly overvalued. The ratio of Sensex share prices to company earnings is now over 34, against under 20 historically. China’s ratio today is just 17.5%. Sensex is bloated by global flood of central bank money. The flood will ebb one day.

It’s recommended to book profits and park the same in Debt funds. Idea of this parking is to bring a cushion to this liquidity driven market, which will taper at some time. Even if these cues do not sustain, one can look at moving back to equities, at an appropriate opportunity.

Also, what is highly recommended, is not to be a Robinhood in these markets, but keep in touch with your trusted advisor and his/ her guidance 😉.

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