Market Review- 12/09/2024

 

Short Term: 0-1 Years

Medium Term: 1-3 Years

Long Term: 3+ Years

 

A. Equity Markets

Table 1- Global Indices

Analysis- In the short term the Nifty 50 is the best performing global equity index. In the medium term, the US, Japan, UK & Taiwan are in contention. In the long term, only NASDAQ had performed better (in the small but broad sample space considered).

Inference- Keeping market cycles in mind we should expect some sort of correction/ consolidation in the short to medium term.

 

Graph 1-

Source- nifty-pe-ratio.com

Analysis- While the Indian equity markets have performed well over the last few years, this has been backed by solid earnings growth (as indicated by lower PE ratios). We still have some valuation comfort. The median PE for the Nifty is 20.7. We are currently at 23.2 which is less than one standard deviation from the median. From the graph above we can clearly see that valuations are not stretched as they were in 99-2000, 2008, 2010 or even more recently in 2021. More importantly valuations are below where they were in the period 2017-2020 (before the Covid fall).

Inference- There is still valuation comfort in the Indian equity markets.

 

Sectoral Analysis

Table 2- Sectoral Indices

Analysis- In the short term the mid & small cap indices have outperformed. In the medium- term PSU’s and Realty have outperformed. In the long-term mid-caps and small caps have outperformed.

Inference- Considering the short and medium term there is some comfort in Banks, FMCG, IT. There is also some comfort in Pharma considering the long-term cycle. Media could be a contrarian bet. We should expect a sharper correction/ consolidation in mid-caps and small caps (compared to broader markets).

 

B. Debt Markets

Graph 2- India 10 Yr Bond Yield

Source- TradingView

Analysis- Interest rates seem to be coming off of a period of consolidation and are trending lower in the short/ medium term. The overall long-term trend (since 2013 at least) seems to be of lower interest rates.

Inference- We expect interest rates to trend even lower in the short/ medium term.

 

C. Gold

Source- TradingView

Analysis- Gold (in US $ terms) seems to be repeating the cycle of 1990-2003. It recently broke out from a long period of consolidation between 2011-2023 and has trended upward ever since.

Inference- Gold prices should move up in the medium term.

 

D. Crude Oil

Source- TradingView

Analysis- Crude seems to be testing an important trend line at around $71/ barrel.

Inference- The short-term trend for crude suggests that this trend line could be broken on the downside. This could be considered good news in terms of reducing inflationary pressures globally.

 

Putting it All Together

Global crude oil demand seems to be coming off indicating a period of concern for the global economy in the short/ medium term. The fact that gold prices are moving up is also a matter of concern as gold is considered a safe haven. This signals a ‘risk-off’ environment globally in the short/ medium term. Global interest rates also seem to be trending lower. Indian equity markets should expect to correct/ consolidate in the short/ medium term. However, considering valuations and certain sectors it doesn’t look like the correction/ consolidation in the Indian markets will be ’too sharp or too long’.

 

 

Disclaimer: The data/information compilation in the Market Review dated 12/09/2024 is the Author’s comment on general trends in the securities market and discussions of broad-based indices. The information/data provided in the Market Review is not a research report as defined under the Securities and Exchange Board of India (Research Analysts) Regulations, 2014 (SEBI RA Regulation, 2014). Thus, the Author is not required to have registration as a Research Analyst under the SEBI RA Regulation, 2014.

The information/data provided in the Market Review is from publicly available data, and appropriate references have been given, which we believe are reliable. While reasonable endeavours have been made to present reliable data related to current and historical information in the Market Review, the Author does not guarantee the accuracy or completeness of the data/ information in the Market Review. Accordingly, the Author or any of his connected persons, including his associates or employees, shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information/data contained, views and opinions expressed in this Market Review.

The information/data provided in the Market Review is purely for information purposes and to disseminate knowledge on the general trends in the securities market. The same does not constitute investment recommendation/advice or an offer or solicitation of an offer to buy/sell any securities.

No person should rely solely on the information/data in this Market Review and must make investment decisions based on their own investment objectives, judgment, risk profile and financial position. The recipients of this Market Review may take necessary professional advice before acting on this Market Review.

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