MUMBAI: The markets are on a roll and the situation is so as the state election results a week ago indicate ongoing stability to continue after the general elections due in five months. The markets have gained about 4.5% in the last six trading sessions and are set to do much more in the coming six months.
At such a moment it would be a good time to look at what could be the sectors or areas where one can expect money making opportunities.
The rally hereon would be all about India and its development, growth and Make in India and Made in India. It would be the domestic consumption story which would be at the forefront of the rally. It would be India, India and India.
The present government has over the last nine and a half years created wealth for its public sector companies. They funded the NPAs of banks and turned the banks around. Enormous wealth has been created by the Indian banks for shareholders and while in trouble it was the exchequer which funded the losses and the government infused a huge amount of capital and took shares in lieu thereof, it is now the government which is benefiting as the entire banking pack has returned multiple times returns to shareholders. Incidentally in many of the PSU banks the government holding is way above the 74% levels and needs to be divested sooner than later. The railway companies, defence sector companies, insurance companies have all seen huge returns across the pack. Retail investors have benefited considerably.
The top outperformers in the market have been the midcap and Smallcap stocks which have gained 3.5x of what the large cap stocks have gained. This is for Samvat year 2079 which got over when Diwali was celebrated less than a month ago. With such outperformance the money in the hands of retail or small investors has increased significantly.
Coming to the benchmark indices, the ensuing rally would have to be led from the front. The current weightage of the NIFTY has two heavyweights in the form of HDFC Bank and Reliance Industries. Both these stocks over the last couple of months have been quite sluggish.
Reliance has begun to finally move and is up about 10% from the lows of October 26. The heaviest of them all is HDFC Bank which has also moved from the low made on October 26 by about 13%. This has given substantial movement to NIFTY. Going forward these two stocks would have to also take leadership positions. Incidentally the benchmark indices have also moved similarly to HDFC Bank.
The highest sectoral weightage in NIFTY is of the BFSI space which is a little over 40%. A large part of this is HDFC Bank which has finally begun to move. BANKNIFTY is also up about 12% from its October lows.
The stage is now set for a sustained rally over the coming six months where the benchmark indices will be on a slow and gradual rise. The rise from 20K to intraday 21K happened in six trading sessions. This is not for the first time that we crossed 20K but from the rally which began at the end of November futures.
FPIs who had a negative view on the Indian stock markets have changed their view currently. How long they remain positive and cut their negative bets is at this point of time unknown, however, their view has helped in a sharp rebound in markets.
In the coming six months manufacturing companies who make in India for selling in India, addressing the local demand and also the export markets, companies which are involved in infrastructure building whether they are EPC contractors, road developers, real estate building contractors would all benefit.
The spend on infrastructure would continue in a big way. We have all seen air traffic in India increase and Covid is way behind us. The number of aircraft that have been ordered by Indian aviation companies is a huge number and is actually fuelling the aircraft manufacturing industry globally. This indicates the growth in passenger traffic, new airports and the need for flying coming up.
All of this which results in better roads and connectivity adds to the GDP of the nation in a big manner. City infrastructure with metros is coming up across so many cities that it would change the way city commute happens. At the same time the capital goods industry has its hands full with new orders being at record highs. India is adding capacity across sectors.
Disposable income across the country is rising and along with that aspirations change. New aspirations throw up further opportunities for growth and all of this would benefit India Inc. Capital markets are doing their job in two important ways.
The first is wealth creation through share price appreciation and the second which is equally important is providing capital to a large number of companies looking to grow their businesses. The spate of issues is a telling sign and one can foresee that calendar year 2024 may see a massive spurt in issues on the main board as well as the SME platform.
In conclusion, expect markets to do well in the coming six months before election results and post the results, based on how the country votes. For the moment, the incumbent government at the Centre is in the pole position and would be expected to win the elections.
The rally which is expected would be across sectors and various segments like the large cap, small cap and mid cap. The rally would be long, over six months and would range in a 8 to12% upside from current levels over the next six months. To encash the rally or take advantage of it, investors would have to have patience.
Enjoy the rally as it unfolds over the next six months and witness the many milestones it would create on its path.