Investment Ideas Note –
November 2024 – Wallet Wealth
Market Outlook
The equity market fell sharply in October month and many investor's gains eroded in the process. Weaker quarterly earnings, persistent FII outflows, ongoing geo-political uncertainty, upcoming US elections, and the Fed's anticipated rate-cut decisions were a few of the reasons contributing to this consecutive decline. Let us see the market performance in October.
| Index Performance October-2024 |
| ||
| Date | October 1 - 2024 | October 31, 2024 | Gain/Loss |
| BSE Sensex | 84266.29 | 79,389.06 | -5.79% |
| BSE Midcap | 49,484.46 | 45966.71 | -7.11% |
| BSE Small cap
| 57,450.85
| 54,982.87
| -4.3%
|
Sensex fell by 5.79% in October, likewise BSE midcap index and BSE small-cap index toppled by 7.11% and 4.3% respectively.
FIIs continued to sell for around $ 9.9 billion in shares in secondary markets. The market bureau suggests that this is the highest monthly FII outflow in recent times. Concurrently FIIs are purchasing heavily in primary markets with a vast number of upcoming IPOs.
This investment trend is also believed to be influenced by Chinese stimulus and anticipated US Fed rate cuts.
| NIFTY 50 | -6.2% |
| Nifty midcap 150 | -6.7% |
| Nifty Bank | -2.7% |
In October, the fall was witnessed in the overall market, but higher losses were registered in the midcap and small-cap segments. This bearish mode is attributed to FII outflows, overheated valuations, and not-so-good quarterly earnings reports.
| MF/FII activity | FII | MF |
| Equity | -91,933.64 | 89,740.4 |
| Debt | -4696.48 | -23003.97 |
| Total | -96,630.12
| 66,736.43
|
As we can see from the FII and mutual fund data, the FIIs sold Rs.91,933.64 crore worth of equity in October compared to the purchase of Rs.49792.84 crore in September. Similarly, the FIIs sold Rs.4696.48 crores in debt in October as compared to Rs. 1277.68 worth of debt in September.
The mutual funds have invested Rs.89,740.4 crores in the equity market and sold Rs. -23003.97 crores worth in the debt market by October 2024.
What to expect next?
Inflation:
Headline inflation declined sharply to 3.6 and 3.7 percent in July and August respectively from 5.1 percent in June. Going forward, the September inflation print may see a significant pick-up as base effects turn adverse and food prices register an upturn. Food inflation, however, is expected to ease by Q4 2024-25 on better kharif arrivals and rising prospects of a good rabi season.
GDP:
The global economy has remained resilient and is expected to maintain stable momentum over the rest of the year, amidst downside risks from intensifying geopolitical conflicts. In India, real gross domestic product (GDP) registered a growth of 6.7 percent in Q1 2024-25, driven by private consumption and investment.
US election results:
Following Donald Trump's projected election victory, global and Indian markets have responded positively, driven by expectations of stronger U.S.-India ties and growth-focused policies. Indian equities rose 1-2%, U.S. Dow futures surged by over 1,000 points, and European markets rallied. This optimism, combined with a recent 6-8% market correction, makes a case for increasing equity exposure.
U.S. 10-year bond yields have climbed, anticipating higher inflation and fiscal deficits under Trump's leadership. A stronger dollar, with the Dollar Index at 105, reflects reduced expectations for U.S. rate cuts. Markets are closely watching the upcoming FOMC decision and potential Chinese stimulus for further direction.
India's Q2FY25 earnings show solid growth excluding weaker Oil & Gas and metal sectors, impacted by lower margins from China's economic softness. India's macro indicators remain stable, with moderate inflation, a current account surplus, and a fiscal deficit lower than expected. Despite recent FII outflows, the rupee remains stable around 84, aided by RBI interventions.
India's outlook for H2FY25 and FY26 is positive, with GDP growth projected at 6.6-7%, supported by stable macros, steady government spending, and anticipated capex acceleration post-election.
RBI Monetary Policy
The MPC (Monetary Policy Committee) meeting was held on October 9, 2024. The Committee reviewed surveys conducted by the Reserve Bank of India to measure consumer confidence, household inflation expectations, corporate sector performance, credit conditions, the outlook for industrial and infra sectors, and other projections of forecasts.
After extensive research and discussions, the MPC decided to keep the repo policy rate unchanged at 6.5%. Also, the monetary policy stance was changed to "neutral" from "withdrawal of accommodation". And continue to focus on aligning inflation with the target alongside supporting growth.
This change has given MPC more flexibility in adapting monetary policy based on relevant economic conditions.
Equity
The market cap over GDP ratio is currently at 106.84. This shows that the market is modestly overvalued. The zone indicates being a little cautious while investing for a short term.
The recent correction in the market was due to various factors that include the geo-political tensions, the market may correct further in the short term and provide an entry opportunity. Hence, the investors can choose to invest in 5-6 tranches as and when the market corrects. Hybrid funds like balanced advantage, multi asset funds are the good entry point at this juncture.
It is advisable not to invest lumpsum and invest into equity mutual funds over a 20–24-week period. As the valuations of small cap is on the higher side and hence one can wait and watch before investing in small cap. It's advisable to book profits in small caps if there are near term goals. We are of the opine that the large & mid cap funds would outperform the small cap this year.
Debt
The 10-year G-Sec is trading at 6.91% and the 5 Year G-Sec is trading at 6.89%. One can start looking at high quality corporate bonds and banking & PSU bonds with the maturity of 3 years could possibly generate a decent double-digit return. The best time to enter duration management funds would be faring better during this point in time. If one would like to look at parking money for a period of less than 1 year can look at investing in ultrashort/money market funds.
We strongly recommend the investors to avoid credit risk funds now.
If you need any advice on investments, do call us at 9940116967.
S.Sridharan, Founder, https://www.walletwealth.co.in/
If you need any advice on investments, do call us at 9940116967.
Team Wallet Wealth,
AMFI Registered Mutual Fund Distributor
2nd Floor, No.8A, 2nd Main Road, Nanganallur,
Chennai – 600 061
Ph: 044-48612114
https://www.walletwealth.co.in/
Disclaimer: The above information and views are personal and confidential. The information herein is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness, or correctness for any particular purpose. Opinions expressed are of our personal and subject to change without notice.
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