‘Market at record high but doesn’t feel like a bull run’

Global cues, domestic macros and strong institutional buying – both FIIs and DIIs – can take the Nifty to new record highs. …writes Sanjeev Sharma

Markets are back at all-time highs but it doesn’t feel like a bull run because retail activity isn’t picking up, said Nitin Kamath, Founder and CEO, Zerodha.

“Active clients on NSE, Google and social media trends are way below all-time highs. Unlikely that activity will pick up given the higher interest rate environment,” Kamath said in a tweet.

“I keep telling our team that our competition is really the bank’s fixed-deposit rates, not our peers. Most retail investors question whether taking the added equity risk is worthwhile when govt bonds and FDs yield 7 per cent plus,” he added.

India continues to be in a sweet spot given 6.5 per cent GDP forecast for FY24 (highest globally), pause in repo rates (6.5 per cent), declining inflation (food and fuel), revival in industrial capex and strong infra push by the Government of India, said Amnish Aggarwal, Head of Research, Prabhudas Lilladher.

Aggarwal said NIFTY has given 5 per cent return in the past two months led by strong resilience in Indian economy and revival of FII flows.

“We are structurally positive on the India growth story given globally leading growth, favourable government policies and strong demographic dividend. High frequency indicators like GST collection (11.5 per cent YoY), peak power demand (8 per cent YoY), recovery in air travel (pre-Covid levels), PV, CV, housing demand, credit card spends (25.8 per cent YoY), services export growth (24.2 per cent in FY23 and 26.2 per cent in April 2023) and improving capacity utilisation are positive.

“Rural demand is also showing signs of a gradual pickup post strong Rabi crop and declining inflation, although El Nino remains a big risk,” he said.

“We remain optimistic on auto, banks, capital goods, hospitals, discretionary consumption and building materials. We believe El Nino and consequent increase in inflation and 2024 general elections are key risks to our call,” he added.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the Nifty is up by around 11 per cent during the last three months and this rally is taking the index to a new all-time high, which is just 62 points away.

The new high is likely to be achieved early next week. Global cues, domestic macros and strong institutional buying – both FIIs and DIIs – can take the Nifty to new record highs. The undercurrent of the rally is strong as reflected in the outperformance of the mid and small-cap indices.

On the sweet spot for India, Rahul Singh, Chief Investment Officer, Equities, Tata Asset Management Company, said if growth remains cyclically depressed in the developed economies and structurally subdued in China, India’s growth premium can sustain.

Singh said India’s (Nifty 50) PER premium to emerging markets has expanded from 45-50 per cent to the 60-70 per cent range. Moreover, there is very little in the horizon which can challenge this narrative with crude/energy prices and any shocks in domestic politics being the key risks.

Singh said while Nifty50 forward PER ratio has not corrected as much as rest of the global markets, it is still 10-15 per cent lower than the valuation in end-2021, thanks to an extended time correction.

“We believe that with the confidence on economic growth, inflation control and profit growth improving, chances of a material correction have reduced and the probability of a steady upmove has gone up,” he added.

Ravi Singhal, CEO, GCL Broking, said the Bank Nifty is at an all-time high, while the Nifty is slightly below new highs.

“Inflation is rapidly declining. We believe that a rate cut may occur after the holiday quarter, as evidenced by the central bank’s massive rate hike. Still, the demand is high,” he said.

Singhal added that on the other hand, inflation has fallen dramatically.

“If the government now makes some concessions in oil and petrol prices, we should expect significant market rallies, particularly in IT, auto, and consumer companies,” he said.

Ravi Singh, Vice President and Head of Research, ShareIndia, said that Indian stock markets are buoyant and are moving towards new high backed by strong macroeconomic factors.

On the back of healthy corporate earnings, FPIs are showing confidence in Indian markets and have invested Rs 37,316 crore in Indian equities in May alone; this is the highest in the last six months. Till June 14, FPIs have invested more than Rs 3,000 crore in cash market.

Singh said RBI’s efforts to curb inflation have paid off and inflation is now showing signs of receding.

“CPI index fell to 18-month low of 4.70 per cent in April 2023. The Indian economy is now looking more stable with strong Q4 GDP rise in 6.1 per cent and an FY23 growth at 7.2 per cent, hence the RBI will remain less hawkish in revising rates. If monsoon meets expectations, we may see Nifty soaring to new highs,” he said.

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