Equity market valuations are broadly reasonable
adjusted for the cyclical low in earnings and
potential for revival going forward.
We remain bullish on equities
from a medium to long term
perspective.
Investors are suggested to have their
asset allocation plan based on one's risk
appetite and future goals in life.
 Indian equities faced volatility in the first half of the month but rebounded in the later half closing on a higher note. The S&P BSE Sensex and the NIFTY 50 ended 1.6% higher each. Mid-caps and small caps saw a sharp correction this month and underperformed the frontline indices. The NIFTY Midcap 100 ended the month down 0.5% while NIFTY Small cap 100 ended lower 4.4%. Market volatility was lower compared to the previous month while the advance decline line was down 14% in March. |
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 FPI inflows in FY24 stood at Rs 2.08 lakh crore (US$21 bn). This was the highest FPI inflow since FY21 when the FPI investment stood at Rs 2.74 lakh crore. Furthermore, even domestic inflows (Rs 2.06 lakh crore) more than matched FPI flows. Meanwhile in the month of March, FPI inflows stood at Rs 35,098 cr (US$4.2 bn) while DIIs bought stocks to the tune of US$6.8 bn. Domestic mutual fund investors have been net buyers in equity-oriented schemes for 36 months in a row. Over the last 11 months, investments through systematic investment plans (SIPs) scaled multiple record highs. Global rating agency Moody's earlier this month raised India's growth forecast for the 2024 calendar year to 6.8% and said that the country will remain the fastest growing among G20 countries. Economic growth as evidenced by the headline GDP print of 8.4% in Q3FY24 remains strong. Furthermore, inflation is slowing down and could give the central bank room for rate cuts in the latter half of the year. With markets at or near all-time highs, investors should be cautious of potential volatility in the near term. Mid-caps and small caps have experienced a sharp run barring the last two months, valuations in India still remain expensive relative to the Asian peers and India remains the most expensive market (on both forward P/E and trailing P/B basis). Investors should focus on the long term rather than making short term decisions and utilise short term corrections to increase exposure to mutual funds. Elections are finally around the corner and the outcome of these would set the tone for the markets. In particular, policy continuity is the key and could likely set the stage for a further rally in equities. The immediate near term trigger is the reporting season. Meanwhile, India's long term growth story remains intact. India is one of the fastest growing economies globally. Construction cycle is already underway with rise in Government Infra spending and the Real estate upturn. Rising private capex should further accelerate the capex cycle. Corporate balance sheets and Banks are in great shape laying a platform for a private capex cycle. We anticipate that market dynamics will be influenced by favorable cyclical factors and capex-driven segments such as infrastructure, domestic oriented manufacturing, and utilities should benefit. Our portfolios are positioned accordingly and we are overweight these segments. We are also optimistic and overweight consumer discretionary sector, particularly automobiles and real estate. We also have exposure to sectors such as power, defense, and transportation that could benefit from government policies. As companies seek financing for expansion and new projects, banks are likely to see an increase in credit demand, which should bolster their performance. We expect the improved pricing environment to continue and strengthen in the pharmaceutical sector. We are underweight in the exports segment due to slowing global growth. |
Source: Bloomberg, Axis MF Research.
