Sensex has given 0.67% returns in the last month and 14.63% on a yearly basis
As we write this note in October, Sensex has given 0.67% returns in the month of September and 14.63% returns in the last one year. The major contributors to this growth in the last month are PSU, Capital Goods, and Metals. The major performing sectors in the last one year are Capital Goods, PSU, and Realty. Major events we talk about in detail below include India’s Inclusion in the JP Morgan Global Bond Index and the upcoming general election’s impact.
FIIs turned net sellers with a total net sell of Rs. 16,026 Crore in September. DIIs showed a positive trend as net buyers, purchasing Rs. 18,512 Crore during the previous month. DII participation basically demonstrates domestic optimism and confidence in our market.
As per the IMF’s estimates, the global economy is expected to slow down, with growth going from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024, which is lower than the average in a decade. Developed economies will slow down more, from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024, due to tighter monetary policies. Emerging markets and developing economies will see a slight decrease in growth from 4.1% in 2022 to 4.0% in 2023 and 2024.
The US Federal Reserve has maintained its policy rate at a range of 5.25% to 5.50%, but they’ve also indicated their openness to raising rates in 2023 if it’s necessary. On the other hand, the European Central Bank (ECB) has increased its policy rate by 0.25 percentage points to 4.00%.
In a significant move, JP Morgan has announced that India will join the JP Morgan Government Bond Index for Emerging Markets (GBI-EM) starting from June 28, 2024. Initially, India’s weightage will be 1%, and it will gradually increase by 1% each month until it reaches 10% by March 2025. This inclusion will make India the second-largest emerging market in the index, following China. As a result, it’s anticipated that passive Foreign Portfolio Investment (FPI) flows could amount to $20-$22 billion during that period, along with active flows of approximately $3-$4 billion in the lead-up to this change.
Consumer confidence remains robust, as evidenced by the significant surge in personal loans, even in the face of rising lending rates. The notable increase in the consumption of petroleum products can be largely attributed to the substantial volumes sold.
In September, India witnessed a reduction in retail inflation, primarily driven by a drop in vegetable prices. According to the MOSPI’s data, the Consumer Price Index-based inflation for September stood at 5.02%, showing a notable decrease from August’s 6.83%.
While the Rupee depreciated against the USD, it has appreciated against some of the major currencies. Oil price increases due to supply disruptions have led to a major increase in the Crude Indian Basket. Non-oil and Non-gold Imports contributed the most to the widening merchandise deficit.
Despite a worldwide economic slowdown, the Services PMI remains strong. The growth in railway freight traffic has increased significantly, reaching its highest point in 11 months.
Manufacturing PMI continues to be in the expansionary zone but declined slightly month on month. A decrease in new orders of goods contributed to a decline in September.
In September, the combined collection of GST by both central and state governments reached ₹1.62 trillion. This is the fourth-highest monthly collection since the introduction of the GST system and shows a 10% increase compared to the same period last year. The GST receipts for this year align with the finance ministry’s expected 10.5% nominal GDP growth rate. This shows the efficiency of the tax administration and increased consumption.
Lastly, the immediate consequences of the Israel-Palestine war are already evident, primarily affecting crude oil prices, which have jumped by almost 5% since the war began. In the case of India, if this upward trend in crude oil prices persists, it may exert a substantial influence on certain individual stocks as well as the overall economy.
Election vs Market (Nifty 50 index)
Upcoming elections are the talk of the town now. Historically, we’ve noticed that in the lead-up to these elections, the markets tend to react positively. Additionally, if the current leader is re-elected, there’s a good chance that the market momentum will continue afterward. What’s particularly noteworthy is how the markets react to government policies. When significant, yet necessary, reforms are introduced, they can sometimes lead to market declines. Conversely, when the government enacts policies that support the economy, it usually makes investors happy. Upon closer examination of the data, it becomes evident that elections are just one milestone in the market’s continuous journey. Market fluctuations occur, and they are not always dependent on election outcomes. The data doesn’t provide a clear conclusion, indicating that investors need not be overly concerned about market volatility during the election period.
What is MoneyWorks4me’s action plan for its subscribers?
We stay on course to look at individual securities with strong future outlooks and growth. While taking a portfolio view to diversify and make the most of the rising economy. We have been bullish on the power sector and a few ideas are looking attractive on account of demand surge and policy reforms.
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