Headed For Skies

Historically, the capital markets in India have been mainly traded in the positive during the pre-Diwali and post-Diwali period. It has moved in the green in a range-bound manner, 0-5 per cent, shows the data of last five years.

Leading stock market analyst Deven Choksey, who is also the Managing Director, KR Choksey Investment Managers, says, “Over the years, we have seen that markets have been buoyant and very confident ahead of the festive season. Post festivities, we usually see a correction. However, these are short corrections.

This year, the consumption will be good as this is the first Diwali that people will celebrate post-pandemic and after the opening up of the economy.”

Comparing the data of the last 10 years, the Sensex has  mostly traded higher during the festivals and especially on the  Muhurat trading session (auspicious trading activity in the Indian stock market on the occasion of Diwali).

Tracking 10 such trading sessions from 2011 to 2020, the markets ended higher in seven trading sessions except in 2012, 2016, and 2017.  Emphasizing the retail participation over the years in the markets, Rakesh Bhandari, Director, Nirmal Bang Securities, says, “Retail participation has increased over the years owing to several factors. Millennials now understand the equity markets because of education and increased awareness.”

Owing to the pandemic in the last year, the number of retail investors turning to equity markets shot up drastically amid the low-interest rates available on fixed deposits and equity markets being a good medium to generate decent returns.    

Sectors On-boarding 
In the run up to the festive season, a number of key sectors witness heightened investor’s interest. And this has been happening over several years. Automotive sector stocks and those of the real estate companies often see active buying this time of the year.

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, says, “In general, the festive season remains positive for the broader market, however, most of the time NBFCs, consumer durables, and auto outperform other indices.”

Shailesh Chandra, President, Passenger Vehicles Business Unit, Tata Motors, says, “The demand for cars and SUVs is expected to remain strong in the forthcoming festive season.”

Chouhan of Kotak Securities believes that the real estate sector will be a major focus during the festive season, and we can witness some good action in the space besides others.

“For the current year, we are expecting excellent performance from BSE / NSE Realty Index with diversified financials. Auto should do well, we expect a bullish trend for four-wheelers and commercial vehicles.”

The Big Question
The boom in the capital markets is defining the bull-run and this seems like nothing that we have witnessed earlier. The Sensex and Nifty marked record levels in September 2021 on the back of multiple factors.

The Sensex touched a lifetime high of 60,000 on September 24, 2021. The index jumped from 55,000 to 60,000 in just 28 days, while the index took 158 days to move from 50,000 to 60,000.
Year to date, the Sensex has rallied more than 24 per cent, and the Nifty 50 has gained over 27 per cent.

Looking at the bigger picture, experts believe that inflation will play an important role in the markets and economies too in the future. Currently, the inflation is said to be transitory and will not dampen the sentiments much, said experts speaking to BW Businessworld.

However, the rising commodity prices across the globe can slow down the demand, and major economies including India will want the commodity prices to be under control to keep the growth story intact.  

Several other factors like stimulus pullbacks, the central bank’s plan to possibly hike the interest rates, the government’s plan to keep the growth intact, and measures to support several sectors will be in play in the markets in the coming year, experts pointed out.  

Considering all the above factors, Chouhan believes, “The Sensex and Nifty may remain between a wide trading range of 66000/20000 and 57500/17000 levels.”

Echoing the sentiments, Choksey says, “The reasonable expectation should be a 15 per cent appreciation in the Sensex and Nifty in the next one year. This appreciation cannot be ruled out on a yearly basis as long as the economy remains robust.”  Thus, it will be in the interest of all stakeholders including the retail investors, that the current bull-run continues for as long as it takes.

And for that to happen, the economic activities have to pick up, and inflation needs to be in check so that the investors are consistently interested in the India growth story.