Markets volatility continues, underperforming global markets, exercise caution and risk management
The markets in the month of March traded in a narrow range and closed slight positive after making a new high of 22527 on nifty and 74245 on Sensex on 11th mar’24. Nifty has given positive returns of 1.5% in the month of mar’24 and 0.4% so far in Apr’24. Market also made new all time high in apr’24 with nifty touching 22776 and Sensex touching 75124 on 10th apr’24. Since then market has been correcting and volatile this month. The markets have been facing heightened volatility since Jan’24 with broad positive trend. The same pattern has continued across different sectors and indices (like small cap & mid cap). This year overall have been very eventful with geo-political risks and various macros factors at play. The domestic macros that supported the market includes high GST monthly collection, India’s core sector growth at 6.7%, FII & DII inflows to markets, Indian economy to grow at 6.8% as per S&P, net direct tax collection jump by 20%. On the other hand there are concern like rising crude oil prices, valuation on higher side, geo political events like Iran Israel which has impacted markets globally. There is also a major event of National elections where 1st phase of voting concluded and other phases will follow till 1st Jun’24 and results declaration on 4th Jun’24. Indian markets has slightly underperformed global markets like US, Japan and European markets. Indian market (Nifty & Sensex) has remained volatile and expected to continue.
Sectoral performance & outlook
Markets are volatile and slightly positive since start of the year and this is across sectors as well. The sectors that have performed well so far this month are Metals, realty, PSUs, Auto with midcap and small cap. The sectors that were laggards are IT, pharma, FMCG, Media. Largecap and banks have performed moderately. The volatility is continuing this month as well and expected to continue till Election results.
Outlook for the Indian Market
Amidst global economic uncertainties, gold and silver have outperformed other asset classes including equities. Gold and silver touched all time high this month and currently at Rs 71k /10 gm and 80k / Kg respectively. This has provided diversification, stability and returns in the portfolio and may continue to do so amidst geopolitical tensions. Hence, it is advisable to balance and diversify portfolio with mix of equity, debt and commodity and do rebalancing on corrections. Indian Markets and global markets will continue to be volatile in near future. The significant corrections in quality stocks and few sectors can be used as buying opportunity for long term investment. Clear Market direction is expected after election results in 1st week of Jun’24.
Fundamental outlook: Valuations across large cap, mid cap and small cap are at premium compared to historical averages. Marketcap to GDP is at an all time high of 132% vs average of 80% of last 20 years. GDP growth remains strong with headwinds like geo political events, weather events. Inflationary rate has eased a little to 4.85% vs 5.09% last month. Corporate earnings have been mix and domestic economic activity maintains momentum. Indian PMI (purchasing Manager’s Index) numbers to remain buoyant for both manufacturing and services sector. The global events and domestic events need to be tracked closely. Markets may remain volatile and trading in narrow range. Some rebalancing in the portfolio at sectors and market cap level is advised at this stage to take advantage of corrections; SIPs may continue and review it with your investment advisor.
Technical outlook: Indian market is volatile with minor corrections in between with limited upside on basis of technical for this month. Nifty is currently trading mix on basis of various technical parameters. The RSI is in overbought zone of 70 to 80. The immediate resistance for nifty is 22900 and may face strong resistance at 23300 level. The immediate support for nifty is seen at 21700 and major support at 21450.
