Market Update – February 2024

January was a month where global equity markets witnessed significant volatility and contrasting performance. Japan (+8%), Malaysia (+4%) and Russia (4%) were the major gainers, while Hong Kong (-9%), Shanghai (-6%) and South Korea (-6%) were the major losers. Indian markets also witnessed swings, with Nifty 50 being flat after two consecutive months of gains. Broader markets continued their gains for the third consecutive month with the S&P BSE SmallCap and S&P BSE MidCap gaining 7.1% & 5.3% respectively. Sector-wise, the oil & gas, PSU, and realty sectors showed strong performances, with gains of 13%, 11%, and 9%, respectively. Conversely, the Bank, FMCG, and metals sectors experienced declines of 4%, 3%, and 1% respectively. Momentum rather than valuations or fundamentals was clearly in the fore.

Market Outlook

Strong domestic liquidity and money chasing returns have seen mid and small caps deliver 27% and 30% returns in the past six months vs just 10% of the Nifty. Owing to this we are seeing many strategists predict a mean reversal and expect large caps to outperform in the coming months. Instead of trying to preempt the market moves we remain focused on identifying companies with strong earnings growth visibility. Post the favorable state election outcome in December, we feel markets have already started to factor in the ruling BJP party coming back to power in the forthcoming general elections to be held in April/May 2024.

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Market Update – January 2024

December was a strong month for equity markets globally in what is usually termed as a “Santa Claus” rally. Indian markets emerged as the best-performing market with benchmark Nifty gaining a strong 7.9%. The RBI, as expected, maintained the status quo on rates and kept their stance unchanged, while the Fed held rates at 5.25%-5.5% for a third straight time and laid out the timeline for rate cuts in 2024. 

Market Outlook

Indian markets are entering CY24 on a high note and with a high base. India has been amongst the best performing markets and is at all time high levels. Crude oil prices have also corrected below $80 per barrel, despite the war in West Asia. We believe that a combination of higher US shale oil production, benign demand growth, attractive renewable energy prices and huge innovation related disruption like EVs, hydrogen, etc.; will ensure that oil prices stay meaningfully soft over the medium to long term.

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Market Update – December 2023

November was a strong month for equity markets globally. After having hit a worrying high of 5%, the US 10-year yield came off sharply, leading to a risk on. US equity markets represented by Dow and S&P500 surged 7%-9% while equity markets in Brazil, South Korea, and Germany also recorded double digit gains. In line with the global markets, Indian equities too had a strong month, with NIFTY50 gaining 5.5%. Mid and small caps saw stronger gains with S&P BSE Midcap and S&P BSE 250 SmallCap being up by over 9% each. It was a broad-based rally with all sectoral indices ending in green. Reality, oil & gas, and healthcare gained 18%, 13% and 11% respectively. After two months of selling, Foreign Portfolio Investors (FPIs) turned positive with net inflows of USD 1.1 billion in Indian equities. Domestic Institutional Investors (DIIs) saw continued net inflows of USD 1.7 billion. Aiding India’s performance were strong economic numbers along with global rating company S&P upgrading India’s GDP forecast.

Market Outlook
Indian economy has been very resilient last couple of years despite the growing challenges faced by the world. The 7.6% print for GDP growth reported for the last quarter has only reinforced the fact that India should be the fastest growing large economy in the world for the next few years. The strong win for the ruling party in the just concluded state elections has also reinforced the views that there will be continuity of the Modi government for the third term in the elections to be held in 2024. Corporate earnings have trended better than expected, providing fundamental support to the markets.

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