The benchmark indices Nifty and Sensex fell 2.5% each last month dragged by selling in banking, financials, FMCG and energy sectors.
After persistent buying for five consecutive months, the FIIs turned net sellers in the Indian equities last month. FIIs net sold Indian shares worth ₹20,620 crore, while domestic institutional investors (DII) net purchased shares aggregating to ₹25,017 crore, data available on exchanges showed.
Going ahead in September, analysts believe the sentiment is likely to remain somber for equities, while in commodities markets, gold and silver prices may shine.
On the global front, the US Federal Reserve is widely expected to hold interest rates amid weak economic data in the country. Hopes of no further rate hike is likely to weigh on US treasury yields, and ultimately dent the US dollar.
Let us take a look at how Sensex, Nifty, gold and others are expected to perform in September.
Equities
As per an analysis by JM Financial for the month of September, Nifty has shown relatively average seasonality during the month. In the last 10 years, the index has closed in the green on four occasions with an average negative return of 0.3%.
In the last 5 years, the Nifty has been closing in the green every alternate year; the index last closed in the green in 2021.
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“The Nifty Mid-cap index too exhibited average seasonality, closing in the green on six occasions with an average return of 0.2%. However, it managed to outperform the Nifty on seven occasions with an average outperformance of -0.5%,” JM Financial Analyst Neeraj Agarwal wrote in a report.
Among sectors, metals, PSU Banks and Real Estate indices have closed in the red on most occasions with an average negative return of 1.9%, 4.2% and 0.5% respectively. Auto index has closed in the green on seven or more occasions with an average return of 0.8%.
“The short term outlook for the Indian stock market remains weak. Inflation data will be a crucial factor that will drive the mood. High CPI print will act as a risk for the market. The US Fed is likely to hold interest rates which will be positive for the equity markets,” said Vinod Nair, Head of Research at Geojit Financial Services.
However, Nair said the valuations of large caps and midcaps seem to be at a higher side. He believes that small caps will continue to perform well as the valuations in this space are still attractive.
“Sectors like automobile, auto ancillaries and energy are likely to see upside momentum in the short term. Stimulus measures in China will support metal stocks, while we are long term positive on the capital goods sector,” Nair said.
Gold
Gold is expected to trade higher in September led by domestic demand amid festive season and a weak rupee.
“It is expected that there will be no interest rate hike by the US Federal Reserve in its September monetary policy. This, along with weak economic data has pressurisied the US dollar. The greenback is likely to remain weak going ahead which is supportive for gold prices,” said Ajay Kedia, Director, Kedia Advisory.
Additionally, the upcoming festive season is likely to improve physical gold demand in the domestic market, he added.
“The festive demand and weakness in rupee may lift domestic gold prices. On MCX, gold is expected to trade in a range of ₹58,500 – ₹60,400 for the month. Investors can buy gold at around ₹59,000 level for a target of ₹60,400,” Kedia said.
Also Read: Gold and silver prices for today—September 1. Check latest rates in your city
Silver
Silver prices are expected to outperform gold prices this month as the gold-silver ratio dropped below 80 level.
“With China announcing stimulus measures, the base metals have recovered. The fall in gold-silver ratio and rising industrial demand is expected to keep silver prices stronger,” Kedia added.
According to him, silver is likely to trade in a broader range of ₹73,000 – ₹77,500 in September and suggests the ‘buy on dips’ strategy.
“Investors can opt for ‘buy on dips’ in silver prices. Buy silver around ₹74,500 with a target of ₹77,400,” Kedia said.
Rupee
The rupee depreciated 0.66% against the US dollar in August. This depreciation is expected to continue even this month, as per analysts.
“The recent US economic data suggest that the labour market conditions have started to falter with skepticism that the inflation may return to the 2% target. So the exogenous factors like uncertainty over Fed rate hikes and the weakness in China’s economic growth will continue to drive the depreciation in the rupee,” said an economist with a private bank.
However, RBI is very active in the forex market and may curb any volatility keep the USDINR spot in between 81.50-83.50, the economist added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 01 Sep 2023, 04:00 PM IST