'At current valuations, we believe large-caps offer better downside support.' 'Hence, we are suggesting a small tilt towards them.'
After a sharp rally in the equities market this year, investors could be better off rotating some funds towards the debt market. Experts believe several tailwinds could spur bond market returns over the next 12-18 months. These include India's robust macroeconomics, declining inflation, and the imminent passive flows of close to Rs 2.5 trillion on account of domestic sovereign bonds getting included in the JP Morgan global indices.
Smaller stocks have emerged as Dalal Street's favourites in 2023 that has turned out to be a "great year" for equities, rewarding investors with big gains, driven by optimism over the country's macroeconomic fundamentals and heavy retail investors participation. Experts said equity markets are experiencing a prolonged bull run and it is during this time that the midcap and smallcap segments tend to outshine their larger counterparts. Till December 22 this year, the BSE smallcap gauge has jumped 13,074.96 points or 45.20 per cent while the midcap index has surged 10,568.18 points or 41.74 per cent.
'The selling in India may emerge as soon as the RBI reverses its interest rate stance.'
The sharp rally in the midcap stocks has made valuations expensive, and there is room for a correction, wrote Christopher Wood, global head of equity strategy at Jefferies in his latest note to investors, GREED & fear. The midcap index, Wood said, now trades at 24.1x 12-month forward earnings compared with 18.7x for the Nifty. Rising crude oil prices, he believes, are another worry for India, which imports nearly 80 per cent of its annual crude oil requirement.
These funds have lowered the entry barrier for investors who can now invest with just Rs 5,000, points out Sanjay Kumar Singh.
Second-tier NBFC stocks are trading at 24.4x their trailing earnings, which is nearly twice their 15-year average of 13.9x
While Reliance put up a good show, NTPC nosedived on the BSE on Monday.
At a time when the whole world is going ga-ga over stocks and debt is too easy to borrow, do not forget gold, says Anil Rego.
'It was because of the huge selloff in the Indian equities that the rupee fell so sharply against the dollar on Friday.'
Global financial firm J P Morgan has said that it plans to include Indian government bonds (IGBs) or government securities (G-Secs) into its benchmark Emerging Market index from next year, a move that will bring down borrowing cost for the government. The inclusion of the IGBs will be staggered over a 10-month period from June 28, 2024 to March 31, 2025, indicating one per cent increment on its index weight. "India's weight is expected to reach the maximum weight threshold of 10 per cent in the GBI-EM Global Diversified, and approximately 8.7 per cent in the GBI-EM Global index," J P Morgan said in a statement on Friday.
The rupee resumed higher at 67.77 per dollar as against last Friday's closing level of 67.78.
Dwaipayan Bose on how index funds play a key role in the diversification of portfolios and help manage risks
The Indian currency has shrunk 2.92 per cent since Donald Trump's victory in the US presidential polls earlier this month.
Will demonetisation lead to a rate cut, leading to higher quantum of lending?
The evolving RBI-government relationship, a reversal in the interest rate cycle and return to profitability will dominate bankers' conversation this year, says Tamal Bandyopadhyay.
'This resilience should be viewed as reflecting the strength of the structural story.'
Rupee, bonds may see knee-jerk reaction, as Urjit Patel is considered an inflation warrior
Opinions vary, but fund managers remain bullish.
'In the short term, we may see some disruptions due to Covid, but in the medium-to-long term, we should keep an eye on US inflation and 10-year bond yields.'
Bajaj Finance was the top laggard in the Sensex pack, skidding over 2 per cent, followed by Kotak Bank, Nestle India, HDFC, M&M and ICICI Bank. ONGC was the top gainer, rallying around 8 per cent. NTPC, Asian Paints, Tech Mahindra, PowerGrid and IndusInd Bank were among the other winners.
Inflation has seen some moderation in the recent past, falling from double-digit figures in 2013 to 7.8 per cent year-on-year in August.
The domestic benchmark indices - the S&P BSE Sensex and the National Stock Exchange Nifty50 - had lost close to 1.5 per cent in three days recently before gaining slightly. Notwithstanding weakness and volatility, the Nifty50 has managed to hold on to the 18,000 mark, while the Sensex has managed to stay above the 61,000 level. The performance of the stocks that comprise these front-line indices remains polarised.
Don't be surprised if growth in the second half of the financial year drops below 4%, which is where it was in the year before the pandemic, warns T N Ninan.
Over the next three - six months, UBS believes earnings will be the main driver for EM equities outperformance.
IPO market hopes to come out of slump in festive season, reports Sundar Sethuraman.
India's inclusion in JP Morgan's bond index can channel billions of dollars into India. How will the government securities market handle it?
Market participants attribute the stability to the Reserve Bank of India's timely intervention in the foreign exchange market, both in terms of selling and buying dollars.
If you are in credit opportunity funds, income funds or dynamic bond funds for a long-term goal, stay put.
The currency market won't care for our moans, groans, cries and sighs. The rupee will find its own level, explains Tamal Bandyopadhyay.
A combination of factors, including heavy investments in US Treasury bonds and dollar sales at a healthy profit, facilitated the Indian central bank in transferring a record surplus of Rs 2.11 trillion to the government for 2023-24 (FY24). The RBI's dollar purchases increased in FY24, supported by robust capital inflows endorsing the economy's health.
Major global indices - the Nasdaq, Bovespa, Seoul Composite, S&P 500, Dow Jones, S&P BSE Sensex, NYSE, DAX, Nikkei and, CAC 40 - have all gained 37 per cent to 75 per cent since their respective March 2020 low.
Overall, in the last five straight sessions, the index has lost nearly 1,129 points.
ONGC was the top gainer in the Sensex pack, rallying around 6 per cent, followed by IndusInd Bank, L&T, UltraTech Cement, Titan, SBI and NTPC. NSE Nifty settled 32.10 points up at 14,707.80.
Armed with necessary macro and micro growth drivers, India is on its way to becoming the fastest growing major economy in the world, a finance ministry report said. Rapid vaccination and teeming festivities will push India's ongoing recovery resulting in narrowing of demand-supply mismatches and greater employment opportunities, as per the monthly Economic Review prepared by the ministry.
Benchmark indices bounced back on Wednesday after falling for five straight sessions, with investors snapping up the recently-mauled IT, finance and consumption stocks amid a supportive trend overseas. A rebounding rupee further bolstered sentiment, traders said. Halting its five-session slide, the BSE Sensex jumped 574.35 points or 1.02 per cent to finish at 57,037.50. Similarly, the NSE Nifty surged 177.90 points or 1.05 per cent to 17,136.55.
Rating agency Fitch on Tuesday downgraded the US government's top credit rating to AA+ from AAA, citing fiscal deterioration over the next three years and repeated debt ceiling negotiations. The development caused a flutter across equity markets, with most leading frontline global equity indices trading weak. Back home, the S&P BSE Sensex and the Nifty50 lost over 1 per cent each in intra-day deals to hit a low of 65,751.53 and 19,517.55 levels, respectively.
A gradual increase works best for the US, as well as global markets, says Nizam Idris managing director, head of strategy (fixed income and currencies), Macquarie Bank.
On Tuesday, the rupee closed lower by 13 paise at 67.27.
The ongoing consolidation in equities would improve return prospects during the second half of 2021, an American brokerage said on Tuesday. Leading indicators relating to fundamentals including growth, stability, government policy and RBI policy, and corporate earnings are "generally positive" about equity returns, analysts at Morgan Stanley said. It can be noted that since the start of the second wave of COVID-19 infections, which also coincided with inflation worries in the US, there has been an uneasiness within investors. From its levels on March 10, the markets are down by nearly 3 per cent despite the late surge over the last two trading sessions.
