Bulls Return- Strong growth, FII trend, pause in rate hikes point at long sustainable bull run in coming months
时间:2024-06-28 23:10:53 阅读(143)
By Manish Jain
After a long lull, Indian equities are re-gaining their mojo. This has come as a massive relief for retail investors. Since April ’23, Nifty 50 has delivered returns in excess of 4.1%, and even more remarkably mid and small caps have outperformed quite significantly. This is a classic sign of the return of the bull market. What is even more noticeable is the sector dispersion. Unlike CY22, the rally seems to be led by a wide variety of sectors and not just the banks. Auto, consumer and real estate have all delivered strong double-digit returns. This shows that markets have now started looking ahead and have already started factoring in the strong earnings growth momentum expected in these sectors in the coming months.
The Q4FY23 GDP growth numbers surprised the markets quite positively. India witnessed a 6.1% y-y growth in its economy taking the full-year growth number to 7.2% (against expectations of 7%). This growth number is not just surprising in itself but quite evenly spread out with both industry and services registering growth in excess of 6% while agriculture registered a growth of 5.5% (despite the uneven distribution of monsoons). The bottom line is that this shows the inherent strength of the economy and increases our confidence that India will continue to remain one of the fastest-growing economies in the world for some time to come. We do believe that there is an upside risk to GoI’s estimate of 10.5% nominal GDP growth estimate for FY24. Remember, at the core of all investment strategies is growth and as long as that sustains, all is ok.
Return of the FIIsIn the month of May ’23, FIIs were net buyers to the tune of US$5bn. In the last two years, this is the highest inflow witnessed in a single month (except August ’22). This ties in with the first point. When you look at the inherent strength of the Indian markets, the strong flows are not surprising and should be expected to last. This should ensure that the bull run continues.
Fall of the giantThe risk-free rate (10-year GoI bond yield) has fallen below 7% for the first time in many months. This is a strong signal that markets now expect RBI to cut policy rates by ~50bps in the current calendar year. Another reason to cheer.
So, the moot point is that everything is pointing towards a long sustainable bull run in the coming months. So don’t be shy and start investing now! However, always remember to invest in quality – the Good & Clean businesses.
(Manish Jain, Fund Manager, Coffee Can PMS, Ambit Asset Management. Views expressed are author’s own.)
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