Markets at life time high amidst Election googly and the momentum continues
The markets in the month of May traded with volatility and closed flat as the election outcome was scheduled on June 4th. FII were big sellers in May before the election event and DII were big buyers. The same volatile trend continued across sectors in the month of May. The market experienced a minor shock due to the election results. Exit polls had suggested that the NDA might surpass 350 seats, with some even predicting over 400 seats. The market went up around 3% on exit poll prediction of strong BJP government and completed reversed the movement next day on the actual results. On 4th Jun’24 Indian market saw very high volatility with intraday movement of 8% and closed at 6% down. This resulted in Rs 30 lakh Crores of Investor wealth erosion. BJP was short of absolute majority but still has been the largest single party and formed NDA government. For the first time, Modi lead a coalition government with the support of other political parties. The market first reacted negatively to the verdict and then gained back traction and recovered the earlier losses. The month of June ended at life time high with Nifty at 24k and Sensex at 79k with a gain of 7% for the month.
Indian market outperformed the world market post clarity on election result in June month. Though the election result was not on expected lines but same government and policies are continuing. The outperformance is mainly driven by under performance in pre-election period. Indian market gained 3.5% from Jan to May whereas US market gained 10.5% in the same period. Thereafter in Jun Indian market gained 6% whereas US market gained 3%. US market has been best performing this year with gain of 15% and Indian market gained 11% from Jan to Jun. FII have turned buyer in Jun month and DII (backed by Retail MF SIPs inflows) have been consistent buyers and providing strong support and stability to the market. The Indian cricket Team lifted the coveted T20 world cup trophy after 17 years bringing further glory and Joy beside the cheer from the markets. The next important event to watch is the Finance Budget scheduled on 23rd July’24. Further, closely track geo political events across the globe.
Sectoral performance & outlook
The sectoral performances are broadly in line with the markets, most have been in positive territory and reaching life time high. Sectors that have done very well in May are Realty, auto and metal whereas in June are IT, auto, realty and banking. The sectors that were laggards in May are IT, PSUs and media whereas in June are PSUs, metal and Energy. Midcap and small cap has outperformed large cap in this period. The sectoral performance will be broadly in line with market performance in this month and also depend on Budget announcements.
Outlook for the Indian Market
Indian, US and other global markets have been in uptrend the whole year and gave good return in last month. Gold and Silver still continues to outperform most asset classes. Gold and silver touched is near all time high around Rs 72.5k /10 gm and 93k / Kg respectively. Midcap and small-cap have performed much better than large cap and also trading at higher valuation compared to historical averages. The prudent approach for investor is to remain diversified across asset class and rebalance it on basis of valuation for meeting their financial goals and risk management. Indian Markets and global markets have shown resilience in recent times and every correction (very few) has been short followed by strong uptrend. The third term of this Government and the upcoming budget will provide further direction to the market. The fundamental and technical outlook for July month are as follow.
Fundamental outlook: Indian market is trading at stretched valuation especially midcap and small cap space. The market cap to GDP is also at near all time high of 150% already discounting many positive factors and robust growth. In line with record highs, GST collections and corporate earnings are also very robust with good growth in infrastructure. The President in recent address to parliament has indicated that the budget will accelerate the reform process. The Budget may be giving road map for next 5 year focus area for growth. However the concerns like geo political events, unemployment, weather events and monsoon may also impact the economy and market. The prudent approach for Investors is to remain invested via SIPs with diversification. Healthy corrections as and when occur may offer opportunity to invest more. Rebalancing is to be reviewed at periodic intervals. Consult and review your investments with your investment advisor.
Technical outlook: Indian market was volatile last month driven by election results. Have taken support at 22k and crossed 24k. Nifty is currently in uptrend on basis of various technical parameters. The RSI is in overbought zone of 77. The immediate resistance for nifty is 24600 and may face strong resistance at 25k level. The immediate support for nifty is seen at 23700 and major support at 23200.
