“Market fluctuations
are your friend, not enemy.” – Warren Buffett
Nifty index started
November on a positive note but
slipped for most part of the month and witnessed recovery towards the end. It
dropped by 1270 points from its highs with some respite towards the end and
managed to close above 24000 zones. On the sectoral front we have witnessed
buying interest in IT and Banking while weakness in Energy, Metal, Auto, FMCG
sector.
Continuous selling by
FIIs was paused due to a clean sweep
by BJP in Maharashtra assembly elections. This win means BJP & allies will
now command majority in both the houses of Parliament, leading to easy passage
of bills & continue major reforms.
Negatives in November:
- Q2 GDP
shocker: Q2 GDP growth of 5.4% was at
its lowest in the last seven quarters. - India’s CPI
inflation rose to 6.21% in October,
above the RBI’s target range which may delay the rate cuts. - India’s
Manufacturing PMI fell to 56.5 in
November compared to October’s 57.5. - Q2 result
season was overall weak. - American
courts have indicted Adani for
bribing some Indian State governments of $250 million during 2021-22. - Trump ups the
ante on tariffs, vowing massive taxes
on goods from Mexico, Canada and China on Day 1. - U.S. President
Biden authorises Ukraine to use
American missiles against Russia, sparking policy shift and international
tensions. - Fed officials
adopting a cautious approach to
future interest rate cuts.
Positives in December:
- BJP &
allies won Maharashtra assembly
elections with a thumping majority, paving way for clear majority in Rajya
Sabha and continuity of policy reforms. - GST collection
increased to Rs 1.82 lakh crore in
November, an 8.5% rise from the previous year. - Festive season
demand has picked up. We have the
longest marriage season (November-January), which should boost consumption. - Crude Oil
prices trading below $70 per barrel,
positive for Indian Markets. - Israel and
Lebanon accepted a US-backed proposal
to end the 13-month border conflict that spiralled into an all-out war in
September with Hezbollah. - Chinese
stimulus packages announcement below expectations, hence limiting further outflow of FII money from
India to China.
Conclusion:
- Indian markets
have corrected over 8% from its peak.
Valuations were pricey as compared to peers and correction was overdue.
December is normally a month of profit booking by FIIs before year end closing,
hence further selling by them is expected.
- Donald Trump
will take charge of office in January 2025 and has already announced what policy decisions will he take post
resuming office. Hence markets will wait and watch till full policy
announcements are done. A tariff war is expected to resume which is unhealthy
for world markets.
- Modi Govt is
also quiet since its victory in Lok Sabha elections. Spending is slow and no major reforms announcement
has been made till now. Budget will be announced on 1st Feb 2025. New Tax Code
is expected to be announced, and other policy announcements should trigger next
leg of market upside post budget.
- Benefits of
good monsoon this year will be seen in rural spending. Q3FY25, influenced by festive and wedding season
demand, likely pick up in government spending, etc. will be pivotal in shaping
the near-term growth trajectory.
Hence, we recommend
averaging in equity mutual fund schemes in coming two months. Once FIIs selling stops, domestic buying which is
consistent will take markets to new highs. We expect markets to be volatile in
December and Nifty may trade in the range of 23500 – 25000 levels.
