NIFTY Continues To Show Strength Amidst Multiple Positive Cues
Despite all the global tumult, March turned out to be a good month for domestic equities, with the bellwether index making a smart recovery after sinking to sub-15K levels early on in the month, at which point stocks had entered heavily oversold levels.
In the past couple of weeks, we’ve witnessed a number of positive cues – including peace talks between Russia and Ukraine, as well as State Elections results in favour of the ruling government. The steadily falling India VIX (down to 18 from 33 month or so ago) is signalling that risk appetite may be returning to the bourses.
On the technical front, the NIFTY witnessed a strong breakout above the 20DMA around mid-March, followed by a decisive close above the 20WMA mark last week. Both these trends signal strength.
Though we may be entering a slightly overbought zone for the short term, it does seem quite likely that equities will continue forming a solid base and moving forward – primarily tracking earnings growth cues from this point on until 2024, give or take a few phases when geopolitical tensions may impact market sentiment. It’s worth noting that domestic companies are expected to clock >20% EPS CAGR growth over the next 9-10 quarters, after witnessing an extremely poor EPS growth rate of barely 7% between in what has been dubbed as the “lost decade” for domestic earnings between 2010 and 2020.
Investors are advised to tread with caution and not trade short term movements; however, it seems to be a good time to accumulate equities in a disciplined manner with a long term horizon.
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