There’s A Tonne Of Money Waiting On The Fence

Stock markets thrive on inflows. Everybody knows that – or should. As money flows in, stock prices rise, and vice versa. Over the past few days, the appetite for buying stocks has been rising. One look at the demand for the two recent IPOs and the over-subscription figures show that investors booked shares worth more than Rs 64,000 crore.

These figures are twice the amount of funds foreign investors pumped into the Indian markets in March and April. This shows investors have deep pockets, and once the purse strings are opened, more money could flow into the markets.

Appetite for good stocks has been quite high among investors. The two IPOs of Thyrocare and Ujjivan have met with roaring successes. Investors are willing to give good IPOs the backing. On the other hand, investors are side-stepping IPOs that are too highly priced. As IPO investors primarily look for listing gains, an overpriced IPO leaves little on the table for investors.
Nevertheless, even if some of the heightened spirit of the IPO market rub off on the secondary market, chances are there could be better days ahead.

The choppiness of the last few weeks is showing signs of easing. Global markets are calmer now as the news of a slowing global economy is behind us. On the other hand, the rise in oil prices suggests that global growth is not all that bad as made out to be.

Domestically, too, things are improving as the results announced so far have shown an uptilt. The early-bird results of 214 companies which announced their results have shown that profit growth in the fourth quarter has come in at 3.8 percent, even as revenue growth has been around 8.3 percent. As the results were expected to be a bit more tepid, this performance is quite commendable and shows that companies are putting up a resilient showing in a slowing economy.

Consumer-led demand is still sturdy. Stocks of automobile companies, financial services and NBFCs, and fast-moving consumer goods companies are projecting decent profit growth. Had it not been for some of the banks and engineering companies, the overall figures would have looked much brighter. However, profit growth of the large-cap Nifty stocks has been marginally higher than the overall figures depict.

The international market is showing signs of stabilising. There are early signs that domestic investors are returning to mutual funds. Domestic institutional investors have turned net buyers in a small way. If the trend continues, and money continues to flow into funds, the equity markets may begin to look up in coming months.

Internationally, too, things are beginning to look stable. The volatility in indices has come off. The US economy is expected to show weaker growth figures and that might see the US Fed push rate hikes further down the road. Such a move would augur well for the stock markets.

However, choppiness cannot be ruled out as, ahead, corporate results are likely to be missed. While much of the banking clean-up among PSU banks has been discounted, the markets are still awaiting the final aggregate figures of non-performing loans. Besides, some of the bigger core sector and commodity companies have yet to report their financial figures.

All in all, the coming week is set to be a bit more cheery than the past few weeks.