Rain Time, Gain Time

On June 28, after a gap of almost seven months, the Indian frontline equity indices once again touched their lifetime high and in doing so became the only major equity market to cross its earlier high. And this despite of our indices being dwarfed by the year-to-date gain as compared to some other indices such as Nasdaq that have gained more than 30 per cent against Indian indices’ 6 per cent gain. This phenomenon primarily happened because our indices were able to contain their fall earlier while other major indices fell much more. Besides, a deeper analysis shows that most of the gain in the US’ market has been due to six stocks. 

These six stocks have accounted for more than 70 per cent of the entire gain by these indices. You can call it the ‘artificial intelligence’ boost. Since the announcement of ChatGPT on November 30, 2022, investors have been gripped by the idea that artificial intelligence will be the next big transformative wealth creator. Nevertheless, in India it is an entirely a different story. It is the broader market that has performed better than Large-Cap stocks. Moreover, all the major cap indices in India are trading at their lifetime high. So, the current gain looks more durable. Currently, with more than 15 per cent NSE 500 index member stocks touching a new 52-week high, the sign is surely positive. 

In addition, the strong advance-decline market breadth where the number of advancing stocks significantly outweighs the declining stocks is a positive sign for the market too. The markets are the strongest when they are broad-based and weakest when they narrow to a handful of large-cap names. Historically and interestingly, NSE 500 has sustained new highs when at least 15 per cent of its member stocks have made a new 52-week high. Beyond these technical reasons, there are some very positive fundamental reasons that are driving our equity market to new highs. Despite global economic uncertainties, the Indian economy continues to showcase resilience and potential. India still appears to have several favourable factors that position it as an attractive investment destination and makes the current bull run durable.

Given this emerging scenario, in our cover story this issue we have analysed the factors that are helping the Indian equity market to gain and why we believe that it is likely to sustain. Our analysts have tried to reverse engineer the growth that is embedded in the market. The consensus growth that is currently baked in the market is not very high and very much plausible. We have also covered a comprehensive sector report on the automobile industry that will give you a sense of what you can expect as we enter the earning season. This sector is likely to be one of the best performing ones in the first quarter of FY24. All in all, I believe we may see some hiccups going ahead purely due to global macro-economic conditions while our new bull market is likely to remain intact. So, our advice is to remain invested.

RAJESH V PADODE
Managing Director & Editor