By Manish Jain
Markets have been on a surge and quite unexpectedly so. Nifty is now at a new high, having crossed 19,400 and is up ~7% YTDCY23 and 22% in the last 12 months. As retail investors there are only two questions that come to mind – a) why is the bull rally happening, and b) what next from here?
India stands tall: Last year was a tough one with a massive slowdown happening globally. USA, EU, UK and China, all went through their fair share of troubles. At one point in time, it looked as if we would also get impacted by the global meltdown. True to expectations, the currency crisis, tightening, the balance of payment etc. all stared us in the face. However, at 7.2% our GDP growth was exactly where it was expected to be. We stood very tall amidst the whole mayhem.
FII flows:One key catalyst that has turned around the market fortunes is the FII flows. They were selling aggressively last year and moving money from India to other emerging markets. However, the tide seems to have turned now. The net inflow has been strong and should continue in the coming months.
Rural growth: At the start of the CY23, it seemed like rural growth would continue to remain iffy as monsoons were expected to be below normal and WPI inflation remained alleviated. However, all of that seems to be a distant memory and rural demand is already early showing signs of a strong revival.
Broad basing of earnings growth: Last financial year Nifty reported strong earnings growth but a large part of it was driven just by banks while other sectors continued to suffer. However, now this trend is expected to reverse. Banks, Auto, consumer, are all expected to participate in the mid-teens market earnings growth.
So, now having established that the market outlook remains strong, what should the investors be doing? The way we, at Ambit, are looking at the markets, we feel that this is a strong sustainable bull market that’s staring at us. Valuations are not expensive, earnings are strong, and the government is stable. There seems to be no red flag on the horizon. The visibility is fairly strong for the next 18-24 months. So our advice? It would be to buy and hold. Invest now, the right time was yesterday. However, here are two pieces of advice before we part ways – a) don’t get swayed by noise and hold on tight to equities, and b) always buy quality businesses.
(Manish Jain is a Fund Manager, Coffee Can PMS at Ambit Asset Management. Views expressed are the author’s own. Please consult your financial advisor before investing.)