“Don’t always trust what you see. In a bull market, even a duck looks like a swan”.
– Vijay Kedia (Indian Investor, entrepreneur, philanthropist, founder of Kedia Securities)
The month of
June presented a blockbuster rally in the Indian stock market, that led both the NIFTY-50 and BSE-Sensex
to climb to their all-time highs, not once, but thrice. The NIFTY-50 traded
near the 19,300 mark and Sensex surpassed 65,000, as the month ended on the
back of strong inflows from foreign institutional investors (FIIs), robust
corporate balance sheets, moderating inflation and growth picking up coupled
with expectations of a normal monsoon season, all of which bolstered the
sentiment of market participants.
Positives in
June:
- US Fed
pauses rates after more than a year of consecutive rate increases. - Oil
Prices drops below 70$ per barrel, despite Saudi cutting oil production. - Retail
inflation eases to 4.25% in May; April IIP rises sharply to 4.2%. - GST
Collection Rises 12% to INR 1.61 Lakh Crore in June 2023 - FIIs
pumped in 27,250 Cr in Indian markets, 4th consecutive month of net buying. - Monsoon
covered entire India and has been expected to remain normal in July. - HDFC-HDFC
Bank Merger makes it world’s 4th largest bank based on market capitalisation.
Threats
ahead:
- Fed
further hiking rates in July meeting. - Progress
of the monsoon in the country considering any delay or below than expected
monsoons can impact the rural recovery. - Rise
in inflation due to subpar rainfall. (Tomato Prices already above 150) - Poor
Q1 Qtly results, making stocks expensive.
Difference
between Markets touching New High & Being Overvalued:
Though markets
have touched new highs, valuations are still lower than the previous time the
index traded at the same level (in Nov’22), on account of compounding of
earnings in the interim.
Due to
better-than-expected company results, Earning Per Share of companies have
improved across the board, resulting in cheaper valuations despite markets
breaking previous high.
Hence one should
not panic, and press the sell button or profit booking, just because a new high
is made. We expect revenues to improve in Q1FY23-24 and further improve
valuations. Crude oil sticking to lower levels despite oil production cuts from
Saudi, due to expectations of weaker demand will further fuel the growth of
Indian stock markets.
Asset
allocation strategy is
always the key to generating alpha (or higher returns) over traditional method
of investing. It usually offers following benefits:
- Control
& command over your portfolio. - Better
tracking of valuations, hence decision for switching for profit booking or
value investing becomes easier. - Curtailing
of number of schemes in your portfolio, from many, to few, making tracking
easier.
Therefore, we suggest, one should revisit their
respective portfolios and discuss same with their RM’s or advisors to know more
on aligning the portfolios with the best asset allocation strategy available.
Happy
Investing!
