In the previous update on the Nifty 50 index, we had mentioned that the Nifty 50 index could retest or drop below the March low of 15,700. Since then, this scenario played out; the Nifty 50 dropped to a low of 15,183 on June 17 and has since been on a recovery path. Many of you have asked us where the Nifty 50 stands now. Here’s the view as the charts show.
As per the above table, we are not yet in a bear market, though it would seem to be just round the corner. But what the data shows is that the period taken to recover from the onset of a bear market back to regaining the previous peaks can be as short as three months or as long as 74 months.
Capitulation marks the end phase that puts a full stop to a bear market and lays the foundation for the next bull phase.
Capitulation is a phase when the sentiment turns so negative that the bellwether indices, stock prices and stock valuations plunge to levels which fundamental analysts didn’t even imagine! When Warren Buffett asks you to ‘buy when there’s blood on the Street’, it is the capitulation phase he’s referring to.
When markets are in a correcting mode, one sector that jumps to mind for its ‘defensive’ qualities is the FMCG sector. With their staple business, non-discretionary spending holds revenues in good stead. But FMCG companies have instead corrected about 20% from their October ’21 peak. Against the Nifty 50, they have been underperformers over the past two years. So, what gives?
In an M&A, company A buys out company B, triggering positive and happy noises in the market. Share prices of both companies jump in joy on the announcement. The news then gets digested and analysed. Shareholders of both companies realise after a bit, that they should have sold out in the first few days after the announcement, rather than swallow stories of ‘synergies’, ‘cost savings’, ‘market leadership’, ‘inorganic growth’ and other jargon that are usually peddled to sell mergers, in company releases and analyst reports.
Indian debt investors have been handed a raw deal in the last three years. Though inflation has been rising and market interest rates edging up, the Reserve Bank of India (RBI) and the Monetary Policy Committee (MPC) were doing their level-best to keep a lid on interest rates, to protect borrowers in a Covid-hit economy.
In our previous Nifty 50 index update, we had built a case for a short-term bounce in the Nifty 50 index that could extend up to 16,800-16,850 range. This price action unfolded in line with expectations and the index moved well past the target zone. The question now is, will this rally continue or is there still a risk of one more leg of downside heading back to the early March lows.
India’s cement industry has always been a good proxy for the core economy, with steady volume growth and players enjoying considerable pricing power unlike other commodities. With cement industry leaders such as UltraTech Cement, Ambuja Cements, Dalmia Bharat and Birla Corporation correcting between 10% and 20% in the last 3 months, could there be an opportunity? We take a deep dive into the cement industry to assess its prospects.
Short term outlook for Nifty 50 : We have been voicing our concerns regarding how overbought the Nifty 50 index has been in the bigger time frame. And, we have been expecting a cool off or correction in the index for the last three months. The view shared in this post on the Nifty 50 outlook is playing out and the Nifty 50 index is reverting to its mean.
On the LIC IPO, a lot is at stake. Rules have been bent, timelines collapsed and all the corners cut to meet deadlines and valuation numbers. The secondary market price is extremely critical for the government as it will decide the annual dilution of five percent that is likely to happen, to reduce the government ownership to seventy five percent over five years. So, for those who are worried about the price now, there is hope.
In our previous post on the Nifty 50 outlook, we had mentioned that the short-term technical outlook for the index was positive and that the index could head to the 18,000-18,300 range. This view played out and the Nifty 50 index hit a high of 18,350 on January 18 and has since been on a downward trajectory.
With the Budget done and dusted, most commentators have pronounced that it is a good Budget for stock markets but an awful one for bond markets. But in our view, whether you – as a bond investor – should celebrate or mourn post-Budget, will depend on your present portfolio allocation to bonds and the kind of bonds you own. Here’s how the budget affects your bond investments.
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