Heading for Some Good Times

October was a great month not just because of the Diwali festivities or the BSE Sensex climbing more than 7 per cent but more so because of foreign institutional investors (FIIs) returning to the Indian markets. Nothing sparkled like banks and PSU stocks in October, so much so that the decent performance of IT stocks went almost unnoticed. The recovery in IT stocks was essential because these stocks are widely owned and good performance in IT stocks not only improves the individual portfolio values but also helps improve the mutual fund NAVs.
 

The BSE Capital Goods index was up by over 7 per cent in October, ranking second in terms of performance just after the BSE PSU index which was up by 9.5 per cent. Solid performance from the capital goods sector is a harbinger of good times for the economy. It also indicates that capacities are being built and a lot of manufacturing activity is happening on the ground level. What is interesting is that my research team tells me there are companies that have bagged work orders of values that are significantly more than their existing market capitalisation!
 

Also, if you look closely at the earnings season, there are enough hits this season to strengthen one’s conviction on stocks. Our cover story in this issue will help you navigate through the earnings season so far. In one of our special stories, we have discussed how to deal with losing stocks as it is important to get rid of underperformers. Our second interesting special story focuses on SME stocks. I think the story is worth looking at in terms of what such stocks hold for long-term investors. What I have witnessed over the years is that the equity markets do not fall or crash for the same reason.
 

To explain further in the current context, going ahead, the news related to the Ukraine-Russia conflict or inflation fears will not impact the market mood negatively. With all the negatives factored in and the peaking of interest rates being speculated upon, these are good times to remain invested in the equity markets. Such is the dichotomy of equity markets that the news we keep getting is negative while the stock prices continue their upward journey. The broader markets may join the rally anytime soon as they have underperformed in the recent months. The market breadth is also improving nicely. 
 

Just to give you an idea, almost 615 stocks made a fresh 52-week high in October compared to 534 shares in September and 151 shares in August. With the support of the global markets there is a very good chance that we are headed for a sweet November! The data from the derivatives side is also encouraging with rollover indicating long positions. Overall, November looks promising for long-term investors and there is a high probability that volatility will remain on the lower side if we go by the India VIX readings. However, one must always be watchful of any new event that may impact the market moods. Continue to remain tuned with us as the markets unfold further.
 

RAJESH V PADODE
Managing Director & Editor