NEW DELHI: The Indian stock market has been volatile over the past one year, however, the recent recovery has brought them to an all-time high. Besides, mid-cap and small-cap stocks continued to outperform large-caps as overall stability helped investor sentiment.
Currently, the Nifty 50 index and Nifty Midcap 100 index are less than 5% away from their respective highs seen in October 2021. However, the small cap index is still about 20% away from its all-time high.
Meanwhile, on the economic front, data has been mixed over the past month, with US retail inflation exceeding market expectations. The same led to an increase in bond yields and a sharp fall in global markets on hopes of a substantial rate hike by the US Federal Reserve. The Fed is expected to raise rates by 75 bps at its September 21 policy meeting.
Looking at all these factors, ICICI Direct Research Desk in a note has suggested a way to navigate the market at the moment.
“As the market is recovering almost all its losses and trading at almost all-time highs, it is better to buy on Dips allocation strategy rather than lum pisum at current levels,” ICICI Securities said in a note.
The brokerage said that, domestically, with the capex cycle revival on anvil (public + private) as well as strong consumer demand across most categories in the post-COVID-19 environment (passenger vehicles, retail, etc), “we are looking to be creative on this.” have remained. overall market”.
Indian equity markets have continued to outperform their global counterparts as investors look at declining commodity prices and better earnings prospects with better growth prospects as compared to other countries.
A sharp fall in global commodity prices, especially in industrial and agricultural commodities, has helped lift otherwise weak investor sentiment. Crude oil prices fell from a high of $120 a barrel to a low of $95 a barrel.
Foreign portfolio investors (FPIs), who were frequent net sellers, have become net buyers since July 2022. Domestic investors, especially mutual funds, have been the major buyers absorbing FPI sales during the same time period.
According to the ICICI Direct Research Desk, despite the impact of global geopolitical tensions and financial market volatility, the Indian economy remains on the path of recovery and economic revival.
“The movement of various high frequency indicators replicates the momentum in the domestic economy. The economic cycle now has more legs (manufacturing revival, capex, global exports) versus earlier consumption cycles,” it said.
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