The “risk-on” momentum continued for equity markets globally in July and Indian markets too participated in this, logging in fresh all-time highs. The favorable macro back drop – moderating inflation, peaking rates, stable growth and support from both domestic and FIIs inflows has led to renewed momentum in the Indian markets since April’23. NIFTY50 was up 2.9% for the month, while broader markets S&P BSE Midcap and S&P BSE 250 SmallCap were up sharply by 5.7% and 7.4% respectively. Foreign Portfolio Investors, who have now been net buyers for fifth consecutive months, invested another USD ~5.7 bn in July while DIIs flows were marginally negative to the tune of USD ~0.3 bn. Pharma sector was the star performer with Pharma index rising 9%, followed by PSU, Power and Realty sector.
Indian markets have participated in the ongoing global rally and are now trading at an all-time high. The good news is this rally has been accompanied by a strong economy, robust corporate profit outlook and improving macros. The initial fear of the El Nino effect induced lower monsoons have been allayed with widespread rains all across the country and forecasts of a normal rainfall for the latter part of the monsoon season. Having said that, in the near-term markets have had a very strong run-up since April – 23 and there is a fair chance that it can take a breather at current levels. Valuations are at just about 10% higher than the long-term average and any correction might be short and swift.
While maintaining our strong and positive view on Indian equities, we would continue to advise restraint. FOMO (Fear of Missing Out) is high and momentum and theme-based stock movement have been very prevalent. We would advise discipline and staying away from greed-based investing in the current optimistic scenario. From our perspective, we continue to follow our fundamental and value-focused way of investing. We believe in being “Rightly invested, rather than fully invested” and are prepared for any opportunity that comes across due to short corrections with the cash in our portfolios. All our portfolios have done significantly well, outperforming significantly and we intend to stick to our core investment philosophies even at the cost of sacrificing near-term returns, if any.