Nifty index witnessed 6% correction marking its worst month after the decent rally post general election in June.
Trump victory has removed some uncertainty but his previous tenure and policies has led to concerns over potential rise in fiscal deficit. Rise in 10-year bond yield from 3.7% t 4.45% and strong move in dollar. Trump trade policies and their impact on India also a major concern.
Uncertainties of US elections and geo-political tension led to FII outflows in Oct in emerging markets. Also, stimulus announced by China & rise in US yield has led to FII outflows.
History has been seen that equity market are not linear market and has witnessed 10% correction more in 22 times out of the last 25 years. Investors should be prepared for such volatility and focus on companies with strong businesses showing sustainable growth rather than chasing market.
After these corrections large caps are trading at fair valuations, mid and small caps remain expensive.
Under the trump administration the corporate tax rate was slashed to 21%, same expectation in second term also that further reduction in corporate and individual taxes aiming to drive US market growth by boosting investments.
MSCI India index has out perform the MSCI emerging market index by 12% in last one year.
RBI kept policy rated unchanged due to food inflation and geo- political tensions. Expectation of rate cut by Q4 in FY24-25.
US GDP YOY growth is at 2.7% to inflation 2.4% 10-year bond yield 4.4% and policy rate at 5%.
Indian GDP YOY growth rate at 6.7%, inflation rate 5.5%, 10-year G-sec at 6.8% and policy rate at 6.5%.
Consumer price index inflation touch 5.5% YOY in Sept 24. The rise has been fueled by food inflation, prices rise in fruits and vegetables.
India’s GDP growth has performed consistently compare to major economies, due to robust domestic demand and favorable demographic dynamics.
Service sector saw an upward trend in housing and personal care. Automobile sector going to be fastest sector compare to other emerging economies.
India stands at fourth position in terms of foreign exchange reserves, these resources provide cushion against external shocks and maintained strong position.
Strategic investments in infrastructure and social programs by the govt., aim to sustain long term growth.
Manufacturing, technology and renewable energy has hot investment sector to promote make in India more attractive destination for both domestic and foreign investment.
Due to multiple reasons like young demography population, strong domestic fundamentals, expanding middle class has strong support to take up Indian growth story as global economic growth contributor to next level.
In October 24, market has seen inflow of 1.07 lakh crore approx. by the DII’s compare to FII’s outflow of 92.5 thousand crore of approx. Approx 1.75 lakh crore inflow has been seen by FII’s in FY23. But against expensive selling of FII’s, DII’s has infused 4.42 lakh crore in CY24 YTD, shows strong demand and risk appetite from domestic investment in spite of external pressure.
Nifty 50 average PE is trading at 23x.
Due to inflation at 6.2% in Oct 20 and food inflation at 10.9% has a concern for RBI to exercise its policy.
In spite of domestic long term macro fundamentals, Indian bond market may witnessed high volatility due to mixed global macro signals, central bank policies across developed markets and rising geo-political tensions. Yield of long-term maturity G-sec eased by 40-50 bps although interim volatility.