Relief in Equity Markets, End of Volatility in Sight

After enduring almost 18 months of turbulent markets and concerns sparked by the recent banking crisis in the US and Europe, investors finally heaved a sigh of relief in the month of April. Most of the equity indices traded in the green with the broader market stealing the show as predicted in my previous editorial. In comparison to the Nifty, which gained nearly 4 per cent, the Mid-Cap and Small-Cap indices gave 6-7 per cent returns in the first month of FY24. I believe that we are approaching the end of volatility in the equity market, peak yields and rate hikes by the central banks of India and the US. [EasyDNNnews:PaidContentStart]

This should be welcome news for investors, particularly those who have experienced major dips in their portfolios over the last one and a half years. With the broader markets now active, they can expect their portfolio values to recover rapidly. We anticipate that the current volatility will lead to robust performance for most asset classes over the medium term. There are several reasons to be bullish about the current market conditions, from strong economic indicators to supportive policy measures. The market is showing signs of resilience and potential for growth in the coming months.

India’s GST collection for April 2023 was the highest ever with the Ministry of Finance reporting GST collection of Rs. 1.87 lakh crore, a 12 per cent increase on a yearly basis. The positive impact of the pause in rate hikes by the RBI will add to this. Historically, we have witnessed that the equity market rallies when we are at the final leg of rate tightening. The results for the quarter ending March 2023 have also not thrown any negative surprises barring a few. On an average, any particular company that reported its numbers has seen profit growth on both sequential as well as yearly basis. 

However, everything is not entirely favourable for the Indian equity market since El Nino may play spoilsport for a short duration. NOAA, an American agency, has predicted a 62 per cent probability of El Nino forming by June, which could potentially impact the monsoon. Our cover story delves deep into the relationship between El Nino, heat waves and stock market returns in general as well as sectoral impact in particular. Elsewhere in this issue we have also covered in detail why return on equity (ROE) is important for equity returns and how to predict it in various ways. 

Besides, we have also done a special report on speciality chemicals, which explains the reason why we should remain bullish on this sector for medium to long term. In conclusion, while the equity markets may experience short-term volatility and uncertainty, we believe that the equity market will continue to present opportunities for investors to build wealth and achieve their financial goals. By staying disciplined and focused on the long-term, investors will be able to reap the benefits of equity investing and enjoy the rewards of participating in the growth of successful companies. Therefore, we encourage our readers to stay committed to their investment plans and remain optimistic about the potential of the equity market. We are there for you!

RAJESH V PADODE
Managing Director & Editor

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