Post a good recovery in July the markets moderated in August whilst holding above 17700 mark. Global indices ended negative on the back of an increasingly hawkish note by the Fed. Metals, crude and gold continued to decline during the month. Earnings season witnessed significant decline in profits for Oil and Gas, metals sector which had in the earlier quarters skewed the aggregate profits upwards. All other sectors reported profits that were in line or flat compared to the same period last year.
Our model is based on the PE levels. While the decline in June warranted an 75% deployment, post the recovery and at current levels we suggest exposure for fresh funds to be at 50%.
July witnessed a good recovery for the Nifty which had dropped to its lowest point in the year during the previous month. The benchmark rose 9% for the month in line with all major global indices. Fed was unrelenting in increasing interest rates and this time they hiked it by 75bps taking the fed funds rate to 2.5% from near zero six months ago, RBI is expected to follow suit soon. Metals and IT have had significant earnings downgrades this quarter while other sectors indicated stress due to higher operating costs.
The significant decline in PE levels in June warranted 75% exposure to equities as per our model and we had deployed accordingly. Post the rise in July our exposure for fresh funds is at 50%.
Nifty dropped to its lowest point in the year and touched 15183 in June. Global markets moved in tandem as investors battled high inflation, interest rates and war. In a turnaround high metal prices cooled off rapidly during the month, while Oil and Gold held steady. Earnings for the quarter indicated good growth in profits for most of the large caps leading the Nifty EPS to touch 809 (vs 761 in Mar 2022).
The significant decline in PE levels has warranted 75% exposure to equities as per our model. We closely watch for earnings change or price decline for further entry.
Nifty declined to its near-term low of 15800 levels again in May. The rout was global as most markets declined, some sharper than others. Common issues such as high inflation, interest rates and hawkish central banks triggered panic. High commodity prices and supply side constraints continue to remain major macro worries. Most companies have announced the full year results and there has not been any major positive or negative surprises that impact the earnings.
Earnings of nifty has been increasing at a rapid pace which has caused a significant decline in PE levels. The current PE level warrant an exposure of 50% into equities for all fresh funds into the market.
War, inflation, interest rate hikes and over valuations overshadowed the month of April. Nifty declined by 2% during the month, albeit outperforming its global peers this calendar year. Corporate results announced thus far have been stable with no major negative surprises. Most companies appear to have come back to pre-covid revenue levels. However extra ordinary profits of metals and other commodity-based companies have skewed the earnings of Nifty to a large extent. Central banks are coming out of their accommodative stance and gradually looking at increasing rates and reducing the excess liquidity provided by them into the system.
We are closely tracking the earnings trend of companies to gauge our entry levels. Under the current PE level we invest 50% of all fresh funds into the market.
The panic of war gripped the market during the first half of the month and Nifty dropped to an 8-month low of 15600. However, buying emerged soon after at lower levels taking the markets sharply higher by over 2000 points. Crude rose to a 14yr high creating chaos in many countries including India. On one side Central banks are struggling to catch up as they are in a quandary to choose between growth and inflation, on the other side Governments are batting supply side issues due to the war.
We remain committed to our strategy of investing in good quality companies at attractive prices. Volatility offers an opportunity to buy these companies at an appropriate time.We will closely watch the price and earnings growth to decide on our allocation.
With the covid pandemic almost over and just when the world was sighing with relief, Putin decided to attack Ukraine. Investors globally panicked and equity markets witnessed sharp declines across the board. Crude and metals moved higher on the expectation of supply disruption, while flight to safety took gold to near all-time highs. Inflation, which was already running at record levels will most likely spike further on account of the steep increase in basic metals and fuel prices. Central banks are gradually moving away from their accommodative stance and interest rate increases are around the corner
The linear rise of the market which began post covid has certainly broken for now. Fear induced by the current precarious geopolitical scenario might take out the excess liquidity in equities. As price declines and earnings improve, we are likely to witness the re-emergence of attractive entry points. At current levels we are investing 50% of all the fresh funds. position.
It was quite an active start for the year as the Nifty swayed both ways equally. While it rose to touch a high of 18300, it also dropped to a low of 16800. Fed spooking, liquidity and FII sell off catered to the huge volatility. Corporate profits for the 3QFY22 came mostly in the line of expectations. However, cost inflationary pressure remained the most common cause of margin contraction.
The rise of earnings coupled with decline of the Nifty has brought the PE levels into an investable range. In the current scenario we have deployed 50% of fresh investment that has been allocated. We closely watch for any changes in the earnings or drop of price to further increase our equity position.
We closed the year pretty much the way we did last time with lots of optimism and an overhang of covid. Nifty performed in line with other global markets to close the year with a positive return of 24%. The final Fed/RBI meetings concluded on a hawkish note with indications of a rise in interest rates over 2022/23. While third quarter of this fiscal went on without any lockdowns corporate profits are likely to be normalized. Determining factors for the fourth quarter would be the rise in covid cases, union budget and central bank actions.
The decline of the Nifty during the first half of Dec led to a lower PE ratio and indicated further allocation towards equity. We have currently deployed 50% of any fresh investment
Most of the global markets including India continued to experience profit booking during the month of November. Nifty 50 has declined by 1600pts within a month from its peak of 18600. Earnings season ended with no major positive surprises, fresh strains of covid appear and lock down comes back to haunt, inflation spikes, leaving investors extremely cautious. Majority of the corporate profits this quarter have accrued from cyclicals such as metals and oil related companies compared to the same period last year. This has however propped up the earnings exorbitantly for the Nifty albeit in skewed fashion.
Our process is based on earnings growth in relation to price, under the current circumstance this warrants allocation towards equity to the extent of 25% of any fresh allocation. We continue to monitor the situation and will act when valuations become even more attractive to invest.
Fatigue finally gave into the markets, and it experienced profit booking of about 1000 points after hitting a peak of 18600. Decent set of results, significant earnings appreciation and return to normalcy appear to have taken a back seat as investors sold across the board. Several global fund houses have articulated the over valuation in the Indian markets when compared to peers and are looking to trim their positions. This is evidenced in the FPI levels in 2021 which is less than half of the previous year.
Earnings appreciation over the last six months has been rapid, which has brought the PE to investible levels. We believe for any fresh investment, 25% should be allocated towards equity and rest to be held in cash/cash equivalents.
During the month of September, the markets witnessed another high with the Nifty index nearly touching 18k levels. However even the bulls seemed worried this time and second half had some profit booking. Talk of taper tantrum has lifted the 10yr yields which in turn took the dollar higher against other currencies. Evergrande fears spread across the globe reminding investors of the Lehman moment. Almost all global markets have declined by nearly 5% in tandem and precariously hold on to some crucial supports.
The first quarter of the year saw stupendous growth in earnings for the Nifty which justified the rise in the markets. Coming second quarter results will be critical as most analysts have already upgraded their estimates for most companies considering the optimism post pandemic.
The month of August witnessed the biggest move on the Nifty index for this year. India has moved faster and higher compared to both developed as well as emerging markets. Positive earnings surprise this quarter seems to have contributed to the significant surge while GDP numbers announced in August continued to remain lower than 2018-19 levels. The US Fed in its recent meeting has mentioned that it would be slowing down on its accommodative stance earlier than expected. This is likely to impact easy liquidity conditions and may reduce allocation to global stock markets.
Despite the markets moving to all time high’s, PE ratio has moved lower with a big jump in earnings. This has given room for us to buy our first tranche for fresh funds at current valuations. We will buy the next tranches for fresh funds as and when the valuations become more attractive, by the earnings moving up, the overall market moving down or a combination of those
The Nifty index continued its sideward move this month as well, hovering between 15600-900. On the one hand earnings has appreciated rapidly over the previous few months while on the other there is an expectation of a third-wave attack. Optimism in the market has brought in a flurry of IPOs, a number not seen in the recent past. Oversubscription rates for these IPOs indicate the huge appetite amongst investors and the high liquidity levels.
Earnings appreciation has caught up with the rise in prices bringing down the PE ratio to a level where investment is feasible. We have bought our first tranche at the current levels and will increases exposure to equity when valuations become more attractive.
The markets appeared to be in a consolidation mode after hitting an all-time high of 15900 in June. Promising year end numbers along with drastic decline in covid cases have held up the momentum thus far. It is important to note that FIIs have been net sellers for the 4th month in a row. Most of the buying has been from domestic institutions and retail. The cities across the country were under lockdown during the first quarter and business was significantly lost. First quarter results would quantify the loss of revenue in each sector and it would be an important item to look forward.
Earnings have appreciated over the last three months of the previous fiscal due to the brief period of normalcy. However the over valuation levels are still high and we are yet to make fresh allocations towards equity.
Whoever said “Sell in May and go away!” No relenting for the stock markets in May, most corporate numbers announced were well in line with estimates or above. With no negative surprises and base effect providing a fillip, Nifty moved higher by 6.50%, one of the best performing markets for the month. Covid cases witnessed decline from frightening levels of mid-April. Governments appear better prepared and lock-downs have enabled the cut in spread. Investors are exuberant about the pent up demand catching up once the unlocking process is in place. Déjà vu from last year. However last year we were at extremely comfortable valuations with an overshadow of pessimism. This time around the psyche is exactly opposite with extreme optimism and valuations way beyond expectations.
We are not making fresh allocations to equity till appropriate valuations levels are reached.
Rising covid numbers and subsequent interruptions in the economy and businesses have played ruckus to the sentiments of investors in the recent months. However the benchmark index has continued to languish above 14500 levels. On the other side, there has not been any negative surprises from the year end corporate results announced thus far and, global markets especially the US has continued to make new highs on better than expected recovery in their economy. Both RBI and Fed are sounding dovish in their recent meetings and little room for cutting rates further. Health remains the main issue in the near term, the government’s ability to bring stability will be an important factor in the economic recovery process. We are not making fresh allocations to equity till appropriate valuations are reached.
Each time the market has moved higher in the previous three months there has been a sell off. The month of march was no different, where the initial euphoria fizzled away towards the end. The linear movement witnessed since October of 2020 clearly seems to be fractured. While the economy limps back to normalcy the Covid cases in the country are spiking back to peak levels causing a sense of nervousness. Full year profits of the banking sector could throw up negative surprises. We remain cautious under such circumstances and will increase exposure to equities only at appropriate valuations.
February started with a bang, shedding any sort of melancholy associated with the economy, thanks to the frenzy created by the Union Budget. Nifty rose nearly 2000 points during the month to eventually experience profit booking later. Liquidity from the big boys (FIIs and DIIs) came back after briefly tapering in January. Spike in bond yields on anticipation of Fed slowing down the money flow along with over valuation of equity as an asset class are near term triggers for the stock markets.
With vaccinations in place, GDP recovering from the lows and most sectors getting back to normalcy we remain watchful of the earnings growth going forward.
The month of January witnessed a follow through of the optimism of 2020 and Nifty scaled another all- time high. However profit booking emerged towards the end of the month and there was a decline of about 6% from the peak. Global equity markets have been moving in tandem and the decline came together as well. Net purchases from FIIs, one of the most important reason for the recent rally, tapered this month (Rs. 8980cr compared to Rs. 48k and Rs.65k cr in the previous two months).
We are inert towards the market frenzy and volatility, our process defines when to invest and clearly we are not in a hurry at the current levels. We are closely tracking the economic developments and corporate profits which are fundamental factors that would lead to actionable outcomes.
The year ended on a high, with the Nifty scaling 14000 mark for the first time ever. Global equity markets also moved higher albeit at a slower pace. FIIs have invested a record Rs.1.27tn over the last three months. Economic metrics have shown improvement during the quarter with sustainability yet to be verified. This year has been like no other witnessing both extreme pessimism and frenzied optimism all within a matter of few months..
We are at 39x PE, a number way beyond the comprehension of any analyst. The eventuality of investing at such high prices would only be lower returns over a period. We are spectators patiently waiting on the sidelines.
Seldom have we witnessed such exuberance as seen in November. Nifty50 witnessed the levels of 13000 and the Dow Jones Industrial Average topped the 30000 milestone for the first time ever. Confluence of positive news on the development of the Covid-19 vaccine along with the transition of power to the United States President elect- Joe Biden uplifted the market participants around the globe. MSCI marginally increased the weightage of few companies which added to the party. Corporate earnings are also showing signs of growth compared to the dismal 1Qtr. The second quarter GDP data beat estimates albeit shrinking by 7.5% and the country technically moved into recession.
It is important to note that this month’s move was not peculiar to India nor the result of any improvement in its fundamentals. The Nifty PE has moved to 35x and we see no reason to move into equities for now..
October was a recovery month as markets in India jumped over 10% to regain recent highs. Sales data of several companies have enthused investors and there has been a constant debate of a revival against a short term blip. As Europe brace for another lockdown, US looking forward for a presidential election, and locally the outcome of Bihar elections, will keep markets volatile going forward.
We remain on the sidelines and objectively await an attractive level to move further funds to invest in equity.
The month of September witnessed some profit booking as the Nifty declined by over 1000 points from its recent highs. Several industries have resumed operations albeit at a slow pace. Demand is yet to reach anywhere near normalcy. GDP estimates have been lowered but no one has a clue regarding the actual impact of the lock down. Companies have stopped providing guidance and business plans are most likely witness significant changes, hence most future estimates hang in limbo. Nevertheless, retail liquidity is driving the course for now as the cash inflow from the big boys (FII/MF) have dried out.
Earnings for the Nifty has declined from Rs433 to Rs.344 over a period of six months, while price of Nifty has continued to hover above 11000 taking the PE levels 32x. Under such a circumstance, we do not intend to increase our equity exposure until we reach an appropriate valuation.
Three months of momentum continued in August as well, albeit at a slower pace. Retail investors are playing a major role in this euphoria as exemplified by rampant opening of demat accounts, rise in internet trades and lower delivery volumes.The Pandemic situation doesn’t seem to be abating and the gradual unlocking, lower interest rates and reduced taxes are not helping recover demand. Production has hence been at a minimalist level, and GDP for the first quarter tanked to -23.9%.
There has been a consensus amongst RBI, SEBI on the current move in the markets. They have come out vocally against the excessive retail participation that is prevailing. We believe valuations are extremely high and with low visibility regarding the future earnings is ideal to stay on the sidelines.
Momentum continued in July with retail investors on a rampage buying spree. Most of the large companies reported results this month. On an average revenue and profits declined by 40-70%. While some companies managed to add one-time gains and adjust provisions to make the numbers look optically better others were forced to report losses. India was not alone, most other global markets also followed a similar pattern.
With Nifty earnings falling exponentially and index levels rising, the PE moved to all time high levels by end of the month to 30x. Considering the future outlook and further decline in earnings the current levels appear unsustainable. We stay on the sidelines and await a suitable opportunity to increase our exposure into equities.
Markets broke loose in June, with Banking and Financial services leading the rally that took Nifty 7.53% higher. Lower earnings, higher infection count and deeper recession did not matter this month. The Indian stock markets appeared to be playing catch up with it Global peers. As we enter the 5th month of the lock down several businesses are closing down rapidly on one hand leading to rise jobless rates. We await the numbers of the first quarter to get further clarity on the situation.
Valuations have moved back to the higher end of the band and we remain on the sidelines. We intend to add our exposure to equity only when the valuations decline to more realistic levels and within our predetermined range.
May was a volatile month, with the market moving both ways. Most of the companies have announced their fourth quarter results and most of them are deep in the red and provided a bleak outlook. Globally as well organizations have continued to remain shut and normalcy appears a long way ahead. Adding to the already weak economic scenario the month of May witnessed attacks from Locusts, Chinese and inclement weather conditions
We partially invested in equities when the markets declined during March and we will increase exposure further when valuations fall within our predetermined range.
Post a big fall in March, the markets recovered rapidly by 19% in April. The rally was primarily led by Reliance industries which rose by 65% from the lows. Mid and Small caps did not however participate actively in this upside. As a fallout of corona and the general shut down of the global economy several unexpected incidents are being witnessed. The most highlighted one was crude prices going into the negative, Maruti reporting zero sales was another. Looks like there will be more in store as we move into an unchartered territory
Companies are reporting their earnings and most of them as expected are in the negative. While the full extent of damage cannot be evaluated now, it is only prudent to move in gradually in tranches. We have defined our levels to invest and stand by them unperturbed.
Husha busha all fall down! It took a tiny virus to prick the equity bubble, bringing colossal damage to the global stock markets. With all of us under lock down the markets went on a free fall in March. India was one of the worst affected with a decline of over 23% during the month. This has been the sharpest fall in the stock market history across the world and it is also the first recorded Pandemic aecting the entire world. Gold and cash were the only two asset classes that found interest. Irrespective of the quality both equity and bonds were in extreme panic mode to say the least.
How quickly time changes! Till last month investors were looking at new highs and media debating on the resilience of the stock markets despite so many odds against it. Quite dramatically in the last few weeks, a virus attack spread across the world at an unimaginable pace causing so much chaos that has left investors across the world anxious. All major markets witnessed carnage during the month, with US falling as sharply as it did during the Global Financial Crisis. India was not spared either declining by about 10pc from the peaks of January this year
2020 started o positively, however towards the end of the first month things took a turn for the worse. Overheated markets, spread of the corona virus and a lackluster Union Budget failed to enthuse investors. Money shifted from the broad index nifty, which lost nearly 2%, to the severely beaten down Mid and Small caps which ended almost 5% higher. Oil remained one of the biggest losers during the month as the tension in Iran-US conflict receded.
Finally the year ended. 2019 would be one of the rarest years in history which witnessed all asset classes ending in the positive territory. Inverse correlation and diversification theories stayed away this year. All this despite several macro level negatives constantly over shadowing investor sentiments. Continuous inflow of funds especially via MFs moved into a concentrated portfolio of stocks. Only 15 out 50 stocks outperformed the index this year.
Nifty closed near its all-time high with valuations languishing at highly stretched levels of 28X. We continue to remain cautious under the current scenario.
The month of November witnessed new highs in the Nifty and Sensex. The domestic MF inflow into the markets are continuing unabated causing lot of money to chase a few quality large caps. On the contrary GDP continued to decline hitting a multi-year low of 4.5% for the latest quarter. This divergence between the fundamentals weakening and the stock market rising has left investors in a conundrum.