Market Update – August 2021

The markets were generally flat for the month of July, with the Nifty 50 barely ending in the green. However, as has been the recent trend, the broader markets did much better. Buoyed by institutional as well as retail interest, the S&P BSE Midcap ended up ~3% while the S&P BSE 250 Smallcap index recorded a healthy ~8% gain. Amongst sectors, metals and real estate were the best performing while autos & power lost the most. While markets ended flat, it was a volatile month, where investors were tested on negative print from higher inflation numbers, worry over the delta variant of covid and sell-off in Chinese technology stocks.

Q1FY22 quarterly results reported so far have been decent. IT / Commodities largely beat expectations while Financials / Autos / Pharma missed on account of margin pressure as we have been fearing. We continue to monitor the earnings season closely. Going forward, it will be critical to see demand continuing to recover as restrictions related to covid ease. Progress of monsoon which is so far normal would also be important to gauge the continued momentum in rural demand.

Markets have been pretty strong, with the broader markets leading the way. Though earnings have kept pace in most cases, pockets of over enthusiasm are beginning to be seen. Primary markets are in a euphoric zone, with every listing reporting 50%-100% gains on listing. This has led to record oversubscriptions in most Initial Public Offerings (IPOs). The listing of India’s first “start-up” so to say, is a welcome development as it brings in new category of investors, though valuations will always be a topic of debate. More such IPOs are expected in the near future. Although our view continues to remain positive over the long term, investors should expect intermittent sharp volatility in the markets. Careful discretion is advised as also staying away from ‘tip-based” short-term investing.

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