🔊 Listening to the Broader Market 🔊

🔊 Listening to the Broader Market 🔊

In the past few weeks, the market has exhibited a strong momentum, favouring all our recent research published in stock reports at Wisbees. Specifically, the midcap segment has demonstrated significant price appreciation, resulting in substantial returns from our picks, such as IRCON and Mazagondock Limited. These picks are based on the Capex and Infrastructure story of India.

Looking ahead, many technical analysts foresee a promising future as the Nifty index breaks all-time highs. However, when considering the global scenario, the fundamentals do not align. The probability of a recession in the US has risen to 50%, and if it were to occur, we must also assess the magnitude of the potential shock.

Nevertheless, India has displayed resilience to this negative outlook as an emerging country, attracting substantial cash inflows from external sources. In the event of a US recession causing a weakened dollar, India, as an emerging market, would likely attract strong inflows.

What does the FPI data indicate?

Generally, Foreign Portfolio Investments (FPI) are regarded as smart money. The graph below illustrates the FPI investment trends over the past four months, sourced from NSDL FPI Monitor.

Foreign investors are displaying significant confidence in the Indian equity market, and this positive trend is expected to continue in the future. Several favourable factors contribute to this optimism, including a robust domestic economic recovery, declining inflation rates, and the government's successful GST collection efforts. In the current month, FPIs have already invested ₹16,405 Crores.

Furthermore, stable oil and petrol prices over the past few months have had a positive impact, particularly on the express logistics sector. A further decrease in petroleum prices would benefit not only the auto industry but also other consumer companies. Additionally, a promising monsoon season is expected to contribute to overall growth.

Here is the data on Declining inflation:-

Source: Economic Outlook

Sectors that tend to perform well in times of falling inflation include consumer discretionary, automobiles, real estate, and manufacturing.

Where the Market is heading?

The Nifty is currently at all-time highs and appears to be taking a pause before potentially continuing its upward rally. Retail participation has been relatively low so far, with most of the rally being driven by institutional investors. As the index surpasses its all-time highs, it is likely to attract more retail participants, thus driving the index even higher.

Analyzing the Monthly Put-Call Ratio (PCR) data, which currently stands at 1.29, it suggests that the market may remain bullish after this week's expiry. While sustaining above the new high might pose a challenge for the market in the near term, the downside risk seems limited due to strong underlying factors. Let's wait and observe how things unfold.

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