“The big money is not
in the buying or selling, but in the waiting” – Charlie Munger
Nifty index started the September month on a positive note and
after the initial dip in the first week, it witnessed a movement of more than
1500 points to touch a fresh all time high of 26277. It remained volatile in
the last two weeks and lost all its gain of the previous month by correcting
from 26277 to 24700. It witnessed volatile swings in last five weeks, as
rallied by 1500 points followed by a sharp corrective move of more than 1600
points.
A sharp cut in key policy
rates by Fed propelled Indian equity markets to new all-time highs, while
sudden escalation in Israel-Iran war, China announcing stimulus packages, SEBI
restrictions on F&O trading and Exit polls showing BJP losing Haryana led
to sharp correction in markets.
Positives in September:
- Fed slashes
interest rates by a half point, an aggressive start to its first easing
campaign in four years. - India’s Services
Sector Reached a Five-month High, With PMI Rising To 60.9 In August, Up From
60.3 In July, Driven by Strong Domestic Demand. - India Has
Overtaken China in The MSCI AC World IMI Index with A 2.35 Per Cent Weighting
Compared to A 2.24 Per Cent for The Latter. - India’s Forex
Reserves Hit All-time High Of $704.89 Billion, Up $12.5 Billion As of Sept 27.
Key reasons for heavy
selling in markets:
- China’s
central bank unveils most aggressive stimulus since pandemic. In September, China unveiled a
monetary stimulus package including cuts to mortgage rates and the amount
of reserves, one is required to keep on deposit with the central bank. Those
and other measures were the most aggressive efforts so far to try to pull the
property industry out of the doldrums and spur faster growth. - Iran-Israel
Conflict: War in gulf region
escalated after Israel attacked Lebanon and killed Hezbollah chief with air
strikes. It also started a ground invasion of Lebanon, expanding the war zone
from Gaza to Lebanon. Iran in a surprise move launched ballistic missiles over
Israel to avenge the killing of Hezbollah chief which triggered a panic selling
in the market expecting an escalation of wider conflict in the region. - SEBI announces
new measures for F&O trading: In
order to protect investors’ interest and cut down on speculative trading,
capital market regulator Sebi came down heavily on the derivatives market by
announcing a series of measures. The six-step framework is designed to tackle
the surge in speculative trading volumes, especially on expiry days, while also
acting as a potential deterrent for retail investors engaging in F&O
trading. - Valuations are
at premium to historical averages:
Since valuations of all 3 broader category indexes were trading at historical
averages, correction was overdue. Above factors allowed markets to correct and
bring valuations to a little cheaper level. - Impact of
State election results: Elections
were due in states of Haryana & J&K. All exit polls predicted a loss of
BJP due to anti-incumbency factor. This also led to selling in markets as a
loss for BJP will be seen as a change in political trend – negative for
markets. Surprisingly, BJP was able to retain power for a 3rd consecutive time
in Haryana and markets took a breath of relief. Coming state elections in
Maharashtra & Jharkhand will also be keenly watched.
Conclusion: All above factors are majorly external &
geopolitical. India is still the best market in the world to invest in.
Investors should treat this correction as an opportunity rather than sell off
their portfolio.
The key factor in today’s
Indian market is the dominance of Mutual Fund investments and its ability to
cushion and support markets from the onslaught of FIIs selling. The
month-on-month inflows from retail investors in mutual fund schemes has not
stopped and continues to grow higher. Fund houses are sitting on ample cash to
be pumped in such corrections.
Big Bang IPO lined up
this month: Companies are rushing to
go public in India this year as the stock market booms, with Hyundai Motor’s
Indian unit gearing up to launch the country’s biggest initial public offering
(IPO) of 2024. Hyundai Motor India, which will be India’s largest Initial
Public Offering (IPO) till date, has fixed the price band for its public issue
between ₹1,865 to ₹1,960 per equity share.
October outlook: Large, Mid & Small Cap Indexes have corrected in
the range of 4-5% each. Large & Small Caps are in fair value zone while
Mid-Caps are still trading in over-valued zone. Q2 earnings season will start
and will play a major role in setting directions for the markets. We expect
markets to be volatile in October and Nifty may trade in the range of
24000-26000 levels.
