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04 Jan 2024

Chart of the Week: As the Indian market surged, FIIs and DIIs were net buyers of equities in 2023

In India, the investment landscape has shifted. While FIIs were net sellers in 2022, they were net buyers in Indian equities in 2023, contributing a total inflow of Rs 1.58 lakh crore. MFs were also net buyers, injecting nearly the same amount (Rs 1.57 lakh crore) as FIIs into Indian stocks. MFs were able to catch up to FIIs in terms of equity investments in 2023 as they were more consistent, and divested in only one month compared to a four-month outflow by FIIs.

Sunil Singhania, a superstar investor and founder of Abakkus Asset Manager, says “When it comes to FII flows my views are very positive. In the next two to three years, FII flows into India will be very high.”

In the equity market, FIIs’ cash segment activity was a major factor, influencing index movements. Of the four months that Nifty 50 went lower, three had FIIs withdrawing from the equity market.

When it came to futures and options, FIIs were net sellers with an outflow of Rs 6,319.8 crore and Rs 8.5 lakh crore, respectively.

FIIs divested in three of four months that Nifty 50 declined

In this edition of Chart of the Week, we take a look at the monthly FII/DII data on Trendlyne’s FII/DII dashboard and identify major trends.

Jan and Feb 2023 saw high FII outflows in equities

The equity markets began 2023 on a sour note, with FIIs taking out Rs 25,292 crore in January. This led to a 2.4% fall in the Nifty 50. However, a substantial Rs 1.2 lakh crore inflow into the options segment by FIIs led them to be buyers at Rs 91,618.4 crore. MFs were net buyers of equities with a total inflow of Rs Rs 21,353.2 crore in January 2023.

Equities overall saw major outflows in January, particularly in the financials and IT sectors, with consumer services, oil & gas, telecommunications, and auto sectors also seeing significant declines. Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed to profit booking as the key driver here. “The simple logic behind FII selling in January is that India is the only large market where FIIs are still sitting on good profits after the disastrous 2022 performance in most global markets.”

In February 2023, FIIs divested Rs 636.4 crore from the equities. This month also saw FIIs return to index options, buying Rs 65,336.3 crore expecting market volatility. Sector-wise, FIIs reduced their stakes in metals, power and oil & gas, while investing in the capex-heavy capital goods sector, motivated by the Rs 10 lakh crore capex investment announced in the union budget 2023. This was followed by a 2% fall in the Nifty 50. MFs were net sellers, with an outflow of Rs 515.1 crore in February 2023. This selling was partly induced by the Adani-Hindenburg case.

Adani stocks attract 25% of March 2023’s total FII inflow

In March 2023, FIIs invested Rs 12,578.2 crore in equities and MFs invested Rs 20,764.3 crore surpassing FIIs investment. The major chunk of FII buying, amounting to Rs 15,446 crore, was made by GQG Partners in four Adani Group stocks. This also led to a 31% sequential rise in MF inflows, according to AMFI.

FII investments continued in April 2023, with an inflow of Rs 15,733.4 crore in equities. FIIs turned overweight on the financials and automotive sectors, which constituted 50% and 14% of their total investment, respectively. On the other hand, MFs turned net sellers, with a total outflow of Rs 6,766.7 crore attributable to an outflow of Rs 4532.6 crore from the equity market.

In May, FIIs had an inflow of Rs 37,369.3 crore in equities and an outflow of Rs 40,036.6 crore in index options. MFs invested Rs 2,446.5 crore into the equities market and had an overall outflow of Rs 2,359.6 crore.

Financials sector sees fluctuating investment patterns

In June, FIIs invested Rs 43,310.8 crore in stocks, providing a positive boost to the market. MFs invested Rs 5,664 crore into the equities market. Mutual funds ended their two-month selling streak and re-emerged as overall net buyers with a total investment of Rs 514.6 crore. Most of the FII investment was done in the financial services, capital goods, and automobile sectors. According to Nirav Karkera, Head of Research at Fisdom, “The banking and financial services segment is large and fairly diversified into smaller, specific sectors. It saw FIIs and MFs reallocate funds from heavyweight banks to smaller banks and NBFCs.”

After significant inflows in previous months, FIIs turned sellers in the financial services and FMCG sectors. Their net purchases decreased in sectors like IT and capital goods, potentially influenced by rising bond yields, higher oil prices, and inflation concerns.

FIIs execute major sell-offs in options starting September

FIIs sold off Rs 18,893.8 crore in equities in September, driven by concerns over potential US Federal Reserve interest rate hikes to curb high inflation. The FIIs also began their options selling spree with a divestment of Rs 2.4 lakh crore. This sell-off was offset by MFs buying Rs 18,512.4 crore in equities.

In addition, Chinese stocks showed an uptick due to their previous market decline and government efforts like interest rate cuts. This drew FII focus from India to China.

FIIs continued their selling streak with a Rs 21,679.9 crore of shares divestment in October 2023. This led to a fall of 2.8% in the Nifty 50. But mutual funds invested Rs 16,916 crore in equities. The FII outflow was because of rising US treasury yields due to the Federal Reserve's hawkish interest rate stance, and market volatility from the Israel-Hamas conflict.

Both FIIs and MFs were net buyers of equity in November, with inflows of Rs 9,433.8 crore and Rs 17,654.3 crore, respectively. This led to FII holdings in Indian equities dropping to a 10-year low, due to the mass selling from August to October.

MFs, however, came to the rescue of Indian markets. According to ICICI Securities, MFs have adopted a more careful and focused strategy, favouring stable and promising sectors amid uncertainty. Healthcare, private banks, and auto saw substantial MF inflows, with multi-cap and mid-cap funds attracting the most attention.

In December 2023, FIIs were net equity buyers with an inflow of Rs 56,390.6 crore while MFs invested Rs 23,894.7 crore in equities.

The influx of funds into equities was on the back of record highs in major indices and a pause in Fed rate hikes. However, FIIs were net sellers overall with an outflow of Rs 2.9 lakh crore due to selling in index options. Mutual funds also broke their two-month selling spree and became net buyers, with an inflow of Rs 412.3 crore.

The Baseline

02 Jan 2024

5 stocks to buy from analysts this week

By Satyam Kumar

1. Amber Enterprises India:

Axis Direct maintains its ‘Buy’ call on this consumer electronics manufacturer with a target price of Rs 3,700, indicating an upside of 19.1%. Analyst Akshay Mokashe says, “The company reported robust growth outlook across all segments, resulting in strong earnings visibility from FY23 to FY26.” He notes rising contribution from the railway and mobility (R&M) division, which yields higher operating margins, and expects it to help improve operating profits in the coming quarters.

Revenue from Amber Enterprises’ electronics division grew at a 48% CAGR over H1FY21-H1FY24. Mokashe believes this was backed by its strategic JV with NOISE, which helped the company expand its market reach in the wearables segment and other smart electronics categories. He remains optimistic about the company on the back of a robust order book in the R&M division, increasing value-added products, and improving operating leverage, which he expects to drive higher ROE, ROCE and operating margins by FY26. He projects a revenue and PAT CAGR of 15% and 34%, respectively, over FY24-26.

2. Siemens:

BOB Capital Markets maintains its 'Buy' rating on this heavy electrical equipment company with a target price of Rs 4,600, indicating an upside of 13.8%. Analysts Vinod Chari, Arshia Khosla, and Swati Jhunjhunwala are optimistic as the company's order backlog increased by 165% YoY to Rs 45,520 crore at the end of Q2FY24. They expect Siemens to benefit from a Rs 26,310 crore order for 1,200 electric locomotives from the Indian Railways.

Chari, Khosla, and Jhunjhunwala forecast a surge in incoming orders/tenders from private companies, as the capacity utilization in the private sector has reached 75% (the point at which companies make new capex plans). They note that margins have expanded across segments as Siemens was able to negotiate better prices, except in the mobility segment due to factory ramp-up costs and R&D expenses for the new rail order. The analysts are also closely monitoring the demerger of its energy business, which is expected by 2025. They believe that Siemens, with its strong order book and diverse customer base, is well-positioned to sustain different capex cycles.

3. Coal India:

Motilal Oswal reiterates its ‘Buy’ call on this coal company with a target price of Rs 430. This indicates an upside of 9.5%. According to analysts Alok Deora and Parthiv Jhonsa, Coal India has made a long-term commitment through FSA agreements to meet the increasing demand in the power sector amid government push for reliable 24x7 electricity supply.” They say that the company aims to increase production to 780 mt in FY24 and 850 mt in FY25.

They also note that the revival in demand and rise in international prices have led to e-auction premiums of 80-100% over the past few months.

Deora and Jhonsa say that Coal India has intensified its focus on capex to improve its evacuation infrastructure. Its capex has tripled from FY20 to Rs 18,600 crore in FY23, and analysts expect it to surpass the budgeted target for FY24. They conclude, “Considering the limitations of renewable energy, the dependence on thermal power plants is expected to grow in the coming years. This will likely increase the demand for thermal coal from Coal India.”

4. Bata India:

Geojit Financial Services maintains its 'Buy' rating on this footwear company with a target price of Rs 1,870, indicating an upside of 17.1%. Analyst Vincent Andrews holds a positive outlook due to margin improvements backed by growth in the premium segment and an asset-light expansion model.

In Q2FY24, the company’s revenue had declined by 1.3% YoY to Rs 834.6 crore, driven by a shift in festive season buying, weaker demand in the mass category due to inflationary pressure, and increased GST rates.

With the premium segment growing at 1.5 times the overall rate, Andrews forecasts an improvement in gross margins. He believes that the recent licensing and manufacturing agreement with the globally renowned fashion brand Nine West will contribute to Bata’s top line, leveraging the company's strong brand recall and reach.

Bata India added 28 stores in Q2FY24, taking the total to 476. It aims to reach 500 franchise stores by 2024. Andrews believes that the company's asset-light, franchise-based expansion model will help in controlling fixed costs and contribute to a gradual improvement in margins. As of December 2023, Bata India has 2,150 stores in 725 cities.

5. Saregama India:

ICICI Direct assigns a ‘Buy’ rating on this movies and entertainment company with a target price of Rs 445. This implies a 19.2% upside. Analyst Bhupendra Tiwary believes its “B2B licensing revenue will grow at 24% CAGR over FY23-25 to Rs 692 crore, supported by monetization of existing music copyrights and new music acquisitions”.

Tiwary believes that growth in licensing revenue will be further aided by the transition into a subscription model, which could increase revenue by 150% to 300% as the industry moves towards a paid subscription model. According to the management, increasing their share of new content across regional languages and acquiring minority stakes in regional music companies will raise licensing revenue by 22%-25% in FY24.

Recently, the company acquired Pocket Aces, a digital entertainment firm with access to more than nine crore digital followers. Analysts expect revenues from TV, films, and events to grow at a 33% CAGR between FY23 and FY25, thanks to Pocket Aces’ digital presence and distribution strength. The management also expects the combined revenues to grow at 27% in the medium term.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

The Baseline

30 Dec 2023

Global indices beat expectations in 2023 | Screener: Outperformers with rising FII holdings

By Shreesh Biradar

We started the year fearful and anxious. Goldman Sachs’ strategy group sent out a warning to its clients, regarding the economic outlook: “Caution: Heavy Fog.” January 2023 began ominously, with rising energy prices, high inflation, a global growth slowdown, a war of words between US and China, and recession fears.

Luckily for us, the pessimists lost this round.

We end the year with two ongoing wars, Russia-Ukraine and Israel-Gaza. But despite this, the fears of 2023 turned out to be more manageable than expected. Volatility fell, and most major global indices delivered high returns over the year. Japan's Nikkei 225 hit a 33-year high, and the US' S&P 500 is just 1% shy of its all-time high of 4,796 points. Even the broader MSCI World Index has given 21% returns year to date.

The Indian stock market has mirrored this global trend, with the benchmark Nifty 50 delivering around 20% returns over the year and reaching an all-time high of 21,779.

In this week’s Analyticks:

Global indices soar: Major markets make big gains in 2023
Screener: Stocks outperforming Nifty 50, with rising FII holdings and strong financials

Let’s get into it.

Inflation soared, but markets made a big comeback

Inflation peaked at the start of 2023, and central banks scrambled to pin it down with interest rate hikes. The US started the year with an inflation rate of 6.4%, way over the Federal Reserve's target of below 2%. Despite the Fed raising interest rates to a 22-year high, US inflation was stubborn for most of the year, thanks to rising energy prices and a hot job market.

The Fed's rate hikes claimed victims early in 2023 – regional banks like Silicon Valley Bank and First Republic Bank toppled. Higher rates also resulted in ballooning debt for economies like Argentina, leading to the Argentinian peso’s collapse againstthe US dollar and hyperinflation, with 161% inflation in November 2023.

Inflation in Argentina rose so fast that restaurant menus and shops used peel-off stickers for prices, since they went up every week.

China was an inflation outlier. Its economy failed to take off post-COVID, resulting in low demand and inflation. China’s inflation even hit the negative zone at -0.5% in November, a deviation from its historical range of 1.5% to 2.5%.

India has been trying to balance its interest rate and inflation. While RBI kept inflation in the targeted range of 4%-6%, it held the interest rate at 6.5%. The RBI has made a hike of just 250 bps since April 2023, compared to a 450 bps increase in the US.

Most of the gains for major indices came in the last quarter of 2023, as inflation tapered down and global central banks finally signaled a pause in rate hikes.

AI gives US indices a boost, while China struggles

The West is in the throes of a new Cold War. The trade war between the US, Europe and China - on everything from chips to cars - has escalated in 2023. The US imposed sanctions on chip exports to China. China retaliated by limiting exports of rare earth materials needed for chip manufacturing. This led to chip shortages and cost increases that affected industries from automobiles to televisions.

Rising chip demand and advances in AI were a boost to American semiconductor/chip companies and AI players, whose stocks (NVidia, Intel, Microsoft, Google) saw huge gains. The Nasdaq 100 delivered 54.3% returns YTD as momentum built around AI. Among the largest markets, the S&P 500 index was the outperformer.

S&P 500 delivered the highest returns in 2023 in USD

China is a different story. There are so many empty houses in China right now that these can accomodate 3 billion people. The country's real estate meltdown, as major companies defaulted on their debt, has spooked investors. The trade war and sanctions also hurt China a lot more than the US.

Anyone trying to predict oil prices in 2023 got their fingers burned. The OPEC cartel tried to keep prices high but failed, as Russia undercut their prices and US ramped up oil exports. Oil briefly traded above $85 per barrel when Hamas attacked Israel. But for most of the year oil prices stayed below that level, despite OPEC+ production cuts.

Lower oil prices limited the Middle East’s revenue. Consequently, the benchmark indices of UAE (ADX General) and Kuwait (BK Main 50) fell 6.8% and 5.2% YTD, respectively.

UK FTSE delivered the highest returns across major indices

India comes out on top

2023 was the year India put a rover on the moon, hosted the G20, and Modi's hugs got international coverage. We were very visible on the global stage, and the Indian economy had a lot of good news as well. The country recorded one of the highest GDP growth rates for the year (7.6% in the first half of 2023). The realty and automobile sectors in India saw the biggest gains in 2023.

India is the fastest-growing economy among large countries

While China struggled with a real estate crisis, the Indian realty sector boomed. The housing sales value in the top seven metros for the first nine months of 2023 exceeded 2022’s total. Nifty Realty was the biggest gainer of the year with 78% YTD returns.

India’s robust GDP growth has been driven by rising domestic consumption. The country recorded its highest-ever automobile sales in November, surpassing Japan and becoming the third-largest market after the US and China. The Nifty Auto index also saw an increase of 42% YTD.

IT stocks focused on services were badly hit due to global reductions in IT spending by major financial institutions. However, new geos and sectors have helped bridge this gap, leading to Nifty IT delivering 25% returns.

India also benefited from an FII inflow of Rs 146,721.1 crore into the Indian equity market. This has positioned the Nifty50 among the top 10 best-performing indices among major economies.

2024 looks more promising at the start, compared to 2023. Let's hope the optimists keep winning.

Screener: Stocks outperforming Nifty 50 with increased FII holdings and strong financials

HDFC Bank has the highest FII change

This screener consists of stocks outperforming both their respective industries and the Nifty 50 index, with increased Foreign Institutional Investor (FII) holdings in the past quarter and strong financial performance.

The stocks are from industries like banks, electric utilities, housing finance, electrical equipment, IT consulting & software, department stores and cement & cement products. Major stocks in the screener are HDFC Bank, Adani Power, LIC Housing Finance, KEI Industries, Sonata Software, Trent and Ultratech Cement.

HDFC Bank tops the list of outperformers with the highest rise in FII holding, which increased by 18.8% QoQ to reach 52.1% in Q2FY24. The Government of Singapore and Invesco Developing Markets Fund have bought 2.3% and 1.2% stakes respectively. The company’s stock price has risen by 11.2% over the past month.

You can find more screeners here.

The Baseline

29 Dec 2023

Five Interesting Stocks Today

1. JSW Steel:

Thismetals and mining firm has been in the news after its CEO Jayant Acharya announced plans to expand its capacity from 28.5 million tonnes (MT) to 50 MT in the next seven years. This jump will incur an expense of around Rs 1 lakh crore. The stock rose to its 52-week high of Rs 895.8 on Thursday after the news broke. According toTrendlyne’s Technicals, the stock has gained 12.5% in the past month.

In November, JSW Steel reported a 7% YoY steel production increase in India. The firm also achieved 90% capacity utilization for the month. The rise in production is linked to the booming realty sector and higher government spending ahead of the election year, which have improved volume offtake.

However, the arrival of large quantities of cheaper Chinese steel on Indian shores has brought down steel prices by 4.6% over the past three months. In response, JSW has boosted its revenue share from value-added products, which contributed nearly 60% of its Q2FY24 revenue. The firm shows up in ascreener for stocks with increasing net profit and profit margin.

The recent hike in coking coal prices to above $300 per tonne is likely to pressure JSW Steel’s margins further. Import expenses for Australian coking coal have risen by $25-50 per tonne in the past three months. The company is now exploring cheaper alternatives like Russian coal.

ICICI Securities says that JSW Steel’s massive capex outlay in an uncertain demand environment poses a huge risk and might balloon its debt. Also, the constant threat of cheaper Chinese imports could keep margins under pressure. However, the recent uptick in domestic demand and a better product mix should support profitability in the near term. The brokerage maintains a ‘Hold’ rating on the stock.

2. Bharat Electronics:

This defence company touched an all-time high of Rs 185.2 today. This was after it secured an order worth Rs 678 crore from the UP government to develop the UP Dial 112 project. In addition, on December 22, it received orders worth Rs 2,673 crore from Goa Shipyard and Garden Reach Shipbuilders & Engineers for the supply of sensors.

So far in FY24, BEL has accumulated orders worth Rs 26,613 crore, surpassing the management’s guidance of Rs 20,000 crore. This has resulted in a 30% increase in the company's stock price over the past month. It also features in a screener of stocks with prices above their short, medium and long-term moving averages.

ICICI Securities expects BEL to win more orders in the defence space before March 2024, potentially raising the order inflow to Rs 30,000 crore in FY24. The brokerage maintains its ‘Buy’ rating with a target price of Rs 203.

Bhanu Prakash Srivastava, Chairman and Managing Director of BEL, said “Our FY24 margin guidance (21-23%) and revenue growth guidance of 15% are intact, and we will be able to maintain that.” According to Trendlyne’s Forecaster, the company’s revenue is expected to grow by 17.2% in FY24. With a strong order pipeline in place, the focus now falls on the execution of projects.

3. Larsen & Toubro:

This construction and engineering company has risen by 15.6% in the past month, reaching an all-time high of Rs 3,559.9 on Thursday. It has also secured multiple new orders –. Its construction arm won a Rs 5,000-10,000 crore order to establish renewable energy generation, power utilities and water systems in Saudi Arabia. It also bagged orders worth Rs 2,500-5,000 crore for its power transmission and distribution business to develop substations and overhead transmission lines in the Middle East. The company completed the acquisition of the entire shareholding of Sapura Nautical Power (JV Partner) in L&T Sapura Offshore on December 27, 2023.

L&T’s tender prospects for H2FY24 stand at Rs 8.8 lakh crore, across sectors like infrastructure, hydrocarbon and power. The order book, as of Q2FY24, stands at a record high of Rs 4.5 lakh crore (up by 21% YoY). Of this, domestic orders account for 65% and the rest are international. While the majority of the orders came from energy projects (Rs 40,100 crore), Rs 2,800 crore were from infrastructure.

In Q2FY24, L&T’s profit increased by 44.6% YoY to Rs 3,222.6 crore, while its revenue grew by 19.9% YoY. It beat Trendlyne Forecaster’s net profit estimate by 16.1%, with its revenue aligning closely with projections. It features in a screener of stocks effectively using their capital to generate profit (improving RoCE over the past two years).

ICICI Securities maintains its ‘Buy’ call on Larsen & Toubro on the back of its robust order book, which the brokerage believes provides strong execution visibility. According to Trendlyne Forecaster, the company has a consensus recommendation of ‘Buy’ from 32 analysts, with 24 giving a ‘Strong Buy’ and 6 recommending a ‘Buy’.

4. Laurus Labs:

This pharma firm has risen by 16% in the past month, outperforming the pharmaceuticals & biotech sector by 9.3%. The company appears in a screener of stocks with strong momentum. The rise follows the management’s optimistic projections regarding the firm’s capacity expansion plans, and its focus on reducing dependence on the antiretroviral (ARV) business. Laurus Labs holds an equity stake of 40% in ImmunoAct, a cell and gene therapy firm. ImmunoAct recently received approval for India’s first Chimeric antigen receptor (CAR) T-cell therapy, a significant development in cancer treatment.

Laurus Labs is working to reduce its reliance on the ARV business while increasing focus on active pharmaceutical ingredients (API), finished dosage forms (FDF), contract development & manufacturing organizations (CDMO), and biologics segments. The management expects growth in non-ARV, FDFs, and APIs to come via new approvals and contracts. It has guided a 31% CAGR in FDFs and a 20% CAGR in the biologics segment for FY24-26.

However, the CDMO synthesis business, which has a revenue share of 19.7%, is slowing due to ongoing R&D projects and delayed sales. In H1FY24, the company’s revenue declined by 23% YoY due to the CMDO slowdown.

The company hopes to boost profitability in the short term by focusing on high-margin non-ARV businesses. Laurus’ shift to higher-value segments has involved an investment of Rs 2,600 crore over the past three years.

KR Choksey is positive about Laurus Labs on the back of its transformation to a more diversified play, from a pure ARV-focused company. The brokerage expects the company’s revenue to grow at a CAGR of 11.6% in FY24-26 and maintains an ‘Accumulate’ rating on the stock.

5. Kansai Nerolac Paints:

This furniture, furnishing, and paints firm rose 3.8% on December 27, following the news of a land sale in Mumbai for Rs 726 crore. At a strategy session conclave on December 10, the firm announced new investment plans in marketing and network distribution, along with the addition of high-margin products in automotive and decorative paints. According to Trendlyne’s Technicals, the company has risen by 3.2% in the past month. It appears in a screener of stocks nearing their 52-week highs with significant volumes.

The company’s 11 new paint products have contributed to a margin expansion of 150 bps. It also aims to expand its network to another 75 towns. Growth is expected in the auto and powder segments, driven by higher sales during the festive season. The construction chemicals sector, currently accounting for 5% of the total business, is also expected to double in size within the next 2-3 years.

Despite subdued rural demand in Q2FY24, the management is optimistic about rising paint consumption in Q3FY24 due to festivities and the harvesting season. Kansai Nerolac’s lower pricing is expected to help it gain market share in the price-sensitive rural market. The company is expanding its presence in weaker geographies, particularly in the South and West regions, by adding more dealers and distribution centres. It is also running campaigns via influencers to announce its presence in these regions.

In Q2FY24, the company’s gross margin improved by 678 bps YoY to 35.6%, thanks to declining crude oil and titanium dioxide prices. However, increased promotional activities and staff costs limited EBITDA to 14%, a margin growth of 364 bps YoY. The company is expected to see further margin improvements in H2FY24, driven by higher demand for premium decorative paints and favourable oil prices.

Prabhudas Liladher notes the company’s focus on technological advances in auto paints (including EVs), and its B2B expansion to 75 cities. KPIL's aggressive expansion plans and an uptick in rural demand are expected to help its top line. The broker maintains an ‘Accumulate’ rating on the stock.

Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.

The Baseline

29 Dec 2023

Chart of the week: Cooling inflation, interest rate cuts make the dollar less attractive

By Bhavani Eswar

2023 began with decade-high inflation. Customers in most countries felt the pinch as prices went up across the board, from fuel to tomatoes, thanks to supply-chain disruptions and the Russia-Ukraine war. Inflation became political: people complained about ‘shrinkflation’ (where companies kept the price the same, but reduced the product size), and ‘price-gouging’. Central banks responded with sharp interest rate hikes.

But the tone of central bank governors began to shift in the second half of 2023. Many central bankers now say that inflation has come to manageable levels. The US Federal Reserve in its last meeting on December 12 sounded dovish and hinted at potential rate cuts starting in 2024. However, RBI’s governor Shaktikanta Das remains cautious and says “Any shift in policy now will be premature and risky. Past rate hikes are still working through the economy, and we will closely monitor how that plays out”.

As inflation and interest rate fluctuations impact a country’s currency, we take a look at the performance of major currencies against the US dollar in 2023.

Eurozone currencies do well as economies recover

The US dollar (USD), the most favored reserve currency due to its safe-haven status, has seen some competition from Eurozone currencies in the last year. The euro, the second-largest reserve currency in the world, appreciated by 3.7% against the dollar in 2023. Similarly, the Great Britain pound, another Eurozone currency, appreciated by 5.3% in the same period.

The recent decline in interest rates as inflation softens, pose a challenge to the dollar, as dollar-denominated assets become less attractive to investors seeking higher yields. The Swiss franc (SFC) appreciated the most (+8.2%) among the Eurozone currencies over the past year.

Swiss private bank J Safra Sarasin said that the Israel-Hamas conflict has driven investors to the franc as a safer option. Additionally, since late 2022, the Swiss National Bank has been purchasing francs to support its value, lowering the inflationary impact of rising costs of importing commodities.

Asian currencies remain stable; RBI intervention keeps rupee range-bound

The Indian rupee has been relatively stable, falling only marginally by 0.5% over the past year. This is mainly due to ongoing intervention by the RBI in both spot and forward markets.

The RBI's total foreign exchange activity constituted 17% of the overall turnover among banks in the onshore over-the-counter market in October. This led the International Monetary Fund (IMF) to reclassify India’s exchange rate regime to ‘Stabilized Arrangement’ from ‘Floating’.

The Chinese yuan depreciated by 2% against the dollar in 2023 as the interest rate differential with developed markets stayed high. Structural challenges like sticky inflation, US sanctions and real estate troubles have added to the depreciation in Asia’s biggest economy. The Japanese yen (JPY) weakened by 7.2%, as the Bank of Japan extended its ultra-loose monetary policy, keeping interest rates negative last year. JPY is expected to rise against the USD once the central bank reverses its monetary expansion policy.

The Russian ruble fared the worst against the dollar, not very surprising to anyone who has been following the politics around the Russia-Ukraine war. The ruble hit a 17-month low as Western sanctions hit the country’s energy exports and the broader economy. As sanctions have tightened and international companies and investments have fled, Starbucks, IKEA and Dunkin’ Donuts have been replaced by local brands like Stars Coffee, Swed House and Donutto. Sanctions on Russian energy exports have contributed to the ruble's 32.8% depreciation against the USD this year, a stark contrast to its 40.2% appreciation last year.

In Latin America, the Brazilian real has appreciated the most against the dollar, rising by 5.5% in 2023. The currency of this commodity-sensitive country has benefited from strong exports earlier in the year, driven by increased global demand and higher commodity prices. In addition, Brazilian policymakers have cut interest rates by 2% since August, with a further 50 bps reduction in the latest policy meeting in December to 11.75%.

The Canadian dollar has also appreciated by 2.4% against the dollar, followed by the Singaporean and Australian dollars at 2% and 1%, respectively.

Stubborn inflation all over the world has led to disparities in purchasing power and the highest-ever interest rate differences between developed and developing economies. This increased volatility in the forex market throughout 2023.

According to the IMF, “In emerging market economies, a 10% US dollar appreciation, linked to global financial market forces, decreases economic output by 1.9% after one year.” However, expansionary monetary policies are gaining traction as central banks see reduced inflationary and geopolitical risks. This shift might improve the exchange rate outlook for emerging markets in 2024.

The Baseline

27 Dec 2023

5 stocks to buy from analysts this week

By Abhiraj Panchal

1. Devyani International:

KRChoksey maintains its ‘Buy’ call on this restaurant chain manager with a target price of Rs 230. This indicates an upside of 19.6%. Analyst Unnati Jadhav remains optimistic about the company with its entry into the Thailand market. Devyani has acquired a controlling interest in Thailand’s Restaurants Development Co for Rs 1,066.1 crore. The analyst notes that chicken is a favourite dish in the region, “Thailand is a strong market for poultry consumption, presenting significant growth opportunities.”

Jadhav is optimistic that this acquisition will position Devyani as a key player in the QSR/LSR market in Thailand and the surrounding region and pave the way for additional growth. While still awaiting the management’s commentary about their growth and profitability plans for the newly acquired business, the analyst retains her estimates. She expects revenue and EBITDA to grow at CAGRs of 22.5% and 21.9%, respectively, for FY24-FY25.

2. JK Lakshmi Cement:

Axis Direct retains its ‘Buy’ call on this cement manufacturer with a target price of Rs 1,000, indicating an upside of 11.9%. Analysts Uttam Srimal and Shikha Doshi say, “Cement demand is expected to remain robust on the back of the government’s infra push, better real estate demand, private capex, and pickup from individual home builders.”

The analysts remain optimistic due to JK Lakshmi Cement’s ongoing capacity expansion. They expect this expansion, along with strategic initiatives, to improve the company’s EBITDA/tonne from the current Rs 700/tonne to Rs 900 and Rs 970 in FY25 and FY26E, respectively. They estimate the company to deliver revenue, EBITDA and profit growth of 10%, 24% and 26% CAGR respectively over FY24-FY26, backed by an 8% volume growth CAGR over the same period. The management is aiming for a 7-8% volume growth CAGR over the next 3-4 years, driven by higher demand and cement consumption.

3. Delhivery:

BP Wealth assigns a ‘Buy’ rating to this logistic services provider with a target price of Rs 450, indicating an upside of 17.6%. Analysts at the brokerage say, “Delhivery's strategic positioning as the most efficient player in the logistics market has poised the company for significant growth in the rapidly expanding e-commerce sector.” They believe that this operational efficiency enables Delhivery to price its offerings competitively.

The analysts are also optimistic about Delhivery's adaptability, underscored by its successful expansion into new markets, and the diversification of its customer base. A key aspect of its strategy is reducing its dependency on its top five customers, which currently account for 40% of its revenues.

They also expect the anticipated growth of over 20% in the third-party logistics space, supported by category expansion, improved return logistics and a focus on tier-2 and 3 cities. They say, “Delhivery's focus on improving its market share and adapting to changing customer preferences positions it as a key player in logistics.”

4. Persistent Systems:

HDFC Securities maintains its 'Buy' rating on this IT consulting and software company with a target price of Rs 8,530, indicating an upside of 15.3%. Analysts Apurva Prasad, Amit Chandra, and Vinesh Vala are upbeat, citing its strength in product engineering services, consistent deal flow, market-share gains over tier-1 competitors, and strategic additions to its senior management. The analysts believe that the recent acquisition of enterprise software platforms of Software AG by IBM and the company's focus on GenAI solutions will boost its growth prospects.

Anticipating improved margins, Prasad, Chandra, and Vala highlight Persistent Systems’ ability to secure deals exceeding $50 million, with a notable focus on managed services and cost optimization. The analysts are confident that the company's expertise in software product engineering will drive market-share gains. New senior management hires from Microsoft, Tech Mahindra and other major players have been key in growing the business and attracting larger clients, helping the company's goal to hit the $2 billion revenue milestone.

5. Manappuram Finance:

Motilal Oswal maintains its 'Buy' rating on this non-banking financial company with a target price of Rs 205, indicating an upside of 19.3%. Analysts Abhijit Tibrewal and Nitin Aggarwal say, "To mitigate the cyclicality in the gold loan segment, the company is actively diversifying into non-gold lending." They anticipate achieving a target 50:50 mix between gold and non-gold businesses and foresee increased gold loan demand due to growth in economic activities.

Tibrewal and Aggarwal expect the company to use data analytics for informed credit decisions, reducing lending risk. They foresee growth in the vehicle loan segment, particularly with the introduction of automated two-wheeler loans. The company’s recent partnership with JCB, venturing into the used equipment business, adds to its vehicle finance portfolio.

With an in-house field collection team and about 94% of customers using NACH (automated payment systems), Tibrewal and Aggarwal expect timely recovery to be a strength. The analysts view the company's diversified geographical presence as an effective de-risking strategy, that will be key to its long-term growth.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

The Baseline created a screener Fast-growing, cheap valuation stocks

26 Dec 2023

Fast-growing, cheap valuation stocks

The Baseline

22 Dec 2023

Five Interesting Stocks Today

1. Jubilant Foodworks

This restaurant chain touched a new 52-week high of Rs 586.9 today, after its unit, Jubilant Foodworks Netherlands, launched a cash offer to acquire the remaining 45.3% in Domino's Pizza Eurasia. DP Eurasia operates the Domino's Pizza brand in Turkey, Azerbaijan, and Georgia.

The acquisition is expected to take place at an average price of €1.1 per share, totaling approximately €73.4 million (Rs 668.8 crore). This move will help the company to expand its presence in pizza delivery, particularly in Turkey, Azerbaijan, and Georgia.

Emkay Global says that the potential expansion into other underpenetrated regions is a future opportunity for Jubilant Foodworks. However, it remains cautious of the adverse currency movements and inflationary pressures in Turkey. The brokerage has a ‘Sell’ rating on the company.

Meanwhile, on December 19, the company initiated a makeover drive for its pizza chain brand Domino’s. Under the campaign, 'It Happens Only with Pizza’, Jubilant Foodworks plans to upgrade its pizza stores, and introduce new packaging & delivery systems with an aim to boost consumer demand. According to Sameer Khetarpal, the MD and CEO, “Priority remains on growing Domino’s as well as our fried chicken brand Popeyes”. He also highlights that the company targets to have 3,000 Domino’s outlets in the medium term.

2. Varun Beverages:

This non-alcoholic beverages firm rose 12% to an all-time high of Rs 1,380 on December 20 as it announced the acquisition of South Africa’s The Beverage Company for Rs 1,320 crore. According to Trendlyne’s Technicals, VBL rose 19.4% in the past month, outperforming the food, beverage & tobacco sector by 13.4% in the same period.

The Beverage Company’s (BevCo) acquisition gives VBL a presence in 10 African nations, including the five existing ones, with control over most of southern Africa. The market is projected to grow to 153.7 crore cases by CY27, with an expected Compound Annual Growth Rate (CAGR) of 5.3% from CY22 to CY27E. BevCo achieved a sales volume of 11.7 crore cases in FY23 across its five manufacturing facilities. The volume distribution included 14.6% for the company's energy drink (Reebost), 14.9% for Pepsi brands, and 70.5% for other in-house brands.

Revenue from Sting and Gatorade increased by 50% YoY. Energy drink Sting contributed 15% to the revenue, and Gatorade contributed 7% in Q3CY23. The greenfield facility in the Democratic Republic of Congo (DRC) has an investment of Rs 1,600 crore for future expansions. VBL plans to launch another energy drink in India with PepsiCo which is forecast to further increase its volumes by 24%.

PepsiCo branded carbonated drinks contributed 15% to the revenue of the company in India, with a growth in sales of 7.5% for Q3CY23. The company expects reduced seasonality as the South and West regions become more important. In Q3CY23, VBL reduced prices on major packs, boosting volumes.

KR Choksey says that PepsiCo and market leader Coca-Cola dominate over 80.0% of the carbonated drinks market in India. VBL, contributing around 90% to PepsiCo's beverage sales in India, benefits from industry growth factors like rising income, increased spending, large youth population, growing urbanization, and improved electricity and cooling equipment availability in rural areas. After completing significant capital expenditures in CY23 and CY24E, an increase in free cash flow is expected, helping reduce debt. The broker maintains a ‘Buy’ rating on the stock.

3. Nippon Life India AMC:

This asset management company rose by 2.9% in the last week and surged 39.1% in the last quarter. Monthly SIPs stood at Rs 17,073 crores, the highest ever, and the number of active demat accounts on CDSL crossed the ten crore mark in November. Nippon AMC is the fourth largest fund house in terms of equity assets under management (AUM).

The firm’s average AUM is expected to increase by 25% YoY in FY24 to Rs 3,664 crore with debt assets forming only 19% of total AUM, according to the management. This, they say, “signals a downward trend in debt assets due to volatile interest rates, new tax treatment restricting long-term capital gain benefits, and higher FD rates offered by banks”.

BOB Capital expects the industry to grow by 15% in the medium term factoring in a 10% rise in annual inflows and believes hybrid funds could gain traction in times of weak debt inflows.

Despite many new entrants in the industry, the firm’s focus on active management of investments could build a competitive advantage over the new entrants who focus mainly on passive funds. Analysts have noted that the firm is among the only few fund houses with a separate risk team and audit being done at both the scheme and AUM level. Additionally, the firm is looking to diversify its revenue sources by entering portfolio management services and alternative investment funds.

According to Trendlyne’s Forecaster, the firm’s net profit is expected to grow at 24.9% YoY in FY24. Due to its established core business, the firm appears in a screener of companies with strong cash-generating ability from core business.

4. Aether Industries:

This specialty chemicals company rose 1.6% on Tuesday after the company entered a strategic agreement and contract with a lithium-ion manufacturer. The agreement is for the commercial supply of one specific electrolyte additive and to initiate the discussion on three other types of electrolyte additives. The electrolyte additive industry has a market size of $1.4 billion (approx. Rs 11,581.3 crore) in 2022. The industry’s market size is expected to grow to $3.5 billion (approx. Rs 29,405.3 crore) by 2028. Owing to this, it has also risen by 5% over the past week, helping it to appear in a screener of highest gaining stocks in the same period.

The company also signed an agreement with Saudi Aramco Technologies for its converge polyols technology on June 9. With this, the company jointly developed the manufacturing process using the converge polyols technology. The company also signed a letter of intent (LoI) with a US-based oilfield services company to become its strategic supplier and contract manufacturing partner on June 7.

However, according to Trendlyne’s technicals, the stock has fallen by 19.2% over the past six months. It recently plunged by 10.8% in two sessions ending November 30 to nearly touch its listing price of Rs 744.4 per share. The stock declined after a fire broke out at its manufacturing facility in Surat on November 29 which injured 25 employees and prompted the Gujarat Pollution Control Board to forbid operations at the facility.

HDFC Securities maintains its ‘Buy’ rating on the company with a target price of Rs 1,200 per share. This implies a potential upside of 35.1%. The brokerage believes that the company’s capacity expansion-driven growth, advanced R&D capabilities, skilled management, a leading market position in most products and diversification will help with revenue growth.

5. Cochin Shipyard:

This marine port and services provider has risen by 19.1% in the past month. During the month, the company launched the first three anti-submarine warfare watercraft for the Indian Navy. The contract was signed with the Ministry of Defence (MoD) in April 2019 for eight ships. The company also signed a new contract worth Rs 488.3 crore with MoD on December 19, 2023, to repair and maintain the equipment and systems onboard the naval vessels.

Cochin Shipyard’s current order backlog stands at Rs 22,000 crore, which will be executed over the next few years. The pick-up in execution provides strong earnings visibility in the coming years. The company expects to receive repeat defence orders and other opportunities worth Rs 13,000 crore in FY24-25. This increasing order inflow will be backed by the expansion of the dry dock and the completion of the international ship repair facility (Q1FY25). This will double the operational capability of the yard and enable the company to construct and repair larger vessels.

In Q2FY24, Cochin Shipyard’s net profit grew by 60.9% YoY to Rs 181.5 crore while the revenue increased by 47.7% YoY. It beat Trendlyne Forecaster’s net profit estimate by 44.4% and revenue estimate by 22.7%. The company also appears in a screener for stocks with improving cash flow from operations for the past two years.

ICICI Direct gives a ‘Buy’ call on Cochin Shipyard and estimates its revenue, EBITDA and PAT to grow at 34%, 78% and 52% CAGR respectively over FY24-25. The analysts expect growth to be led by execution pick-up in all the segments.

Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.

The Baseline

22 Dec 2023

The punches you don't see coming | Screener: outperformers of 2023

The boxer Mike Tyson once said, "Everyone has a plan, until they get punched in the mouth". The world economy gets punched in the mouth, a lot.

In the leadup to 2024, news headlines are filled with predictions for the future. Economists and analysts look at political and macro trends, as well as their financial models to forecast what the next year holds for us.

The problem is that many of these predictions end up being wrong. The future is full of punches that we don't see coming.

Consider The Economist—a starchy, well-respected magazine - which makes a set of predictions in January every year. The writer Morgan Housel points out that the Economist's predictions for 2020 said nothing about Covid, even though China had informed the World Health Organization in December 2019 about "cases of pneumonia in Wuhan of unknown origin".

In 2022, the Economist did not mention a chance that Russia would invade Ukraine, even though by then, Putin had been assembling a huge military force along the Ukraine border for months.

But that’s the point: the biggest risks, which turn our markets and politics upside down, are often underestimated, and obvious to us only in hindsight. People thought Covid was a regional flu; few believed Putin would actually attack.

Even smaller predictions analysts regularly make and have good models to fall back on - like GDP growth and stock market levels - are rarely accurate. At the start of 2023, analysts were all over the place in their estimates for India's GDP growth and likely Nifty levels. India grew faster thanks to a spending boost from the Indian government, a healthy financial sector, and China's unexpected slowdown, which drove down oil prices.

Goldman Sachs came the closest when it came to predicting the levels Nifty would hit in 2023.

What are the risks that we are currently under-estimating, and not paying enough attention to? This week, we look at:

Three risks that may affect 2024, as we head into the new year
Screener: Stocks and industries that outperformed the index in 2023

Let's dive in.

1) The Red Sea turns red: Rising tensions in the Suez Canal can hit oil prices

The 192-km long Suez canal is the fastest sea route between Europe and Asia, andh transports 10% of the world's oil - around 92 billion barrels every year. With the Israel-Gaza war, the canal and the Red Sea have become conflict zones, as Iran-backed rebels, the Houthis in Yemen, have started attacking transport ships and oil tankers.

The tensions in the Suez have driven Brent crude oil prices up from a low of $73 per barrel earlier this month to over $80. If tensions worsen, it could spill over into a regional war that drags additional players like Iran into the mix. And of course, with a war cheap oil would go out of the window, hitting importers like India hard.

The other flashpoint is China and Taiwan. China has long claimed Taiwan as its own, and the US has pledged to defend it from any attack. Analysts have been saying that Chinese Premier Xi Jinping is more risk-averse than Putin, and unlikely to invade. But they have been wrong before.

Taiwan has its elections in January, and a win for the China-unfriendly Democratic Progressive Party may force Xi's hand. China is also in a bad spot economically. Exports have shrunk in 11 out of 13 months, and consumers are not spending. Leaders in a bad spot like Xi usually tend to look for a distraction.

2) Unexpected results: A Trump win in the US, a mixed election result in India

The 2024 US election will likely be between two senior citizens: a 76 year old Donald Trump versus a 80 year old Joe Biden. This rerun of the 2020 election has many American voters disappointed about the choices available.

Trump is fighting a raft of legal cases, and running on a platform of revenge against his enemies and closing down the US economy. Despite all that, he is neck-and-neck in the polls with current President Biden. Some even show Trump leading. Many American analysts still think that the election is a likely Biden win. A win for Trump on the other hand, threatens many global efforts the Biden administration has signed onto, including the climate agreement and funding for the Ukraine war.

Back home in India, Modi remains a popular leader as we approach the Lok Sabha elections. But a spike in inflation, or rising worries around issues like unemployment, could dent the BJP's vote bank. Opposition parties have mainly focused on freebies instead of laying out an economic vision. A coalition or opposition win could threaten India's ambitious economic program.

3) Lies, lies and more lies: AI driving scams and misinformation

A fake video that triggers a riot in Tamil Nadu. A scam call to your parents asking for an OTP, telling them that their bank needs to verify their identity. A link in your gmail that when you click on, steals your passwords. There has been a 200% spike in cybercrime in India this year, and 54% of urban Indians say that they have been targeted by scammers. Disinformation and scams have become a problem for the internet and digital payments like UPI.

The rise of AI can can potentially make this even worse. Already, spoofing the voice of a family member using AI has become noticeable in phone scams. OpenAI CEO Sam Altman talked about this last week: “A thing that I’m concerned about is what happens if an AI reads everything you’ve ever written online … and then right at the exact moment, sends you one message customized for you.” If scams and attacks become more high-volume, automated and personalized, frauds can become an even more significant problem for India in the coming year.

Finally, there is of course 4) the placeholder risk. The one that we don’t know about yet. The future is a place full of sharp turns and blind corners. Hopefully 2024 will be less surprising than the past three years. We could all use a break.

Screener: Stocks from industries beating Nifty 50 in year change %, outperforming their industries in 1-year change %

Shipping industry leads in Nifty 50 outperformance in year change %

This screener shows stocks from industries that have beaten the Nifty 50 index in terms of one-year change %. These stocks have also outperformed their industries in 1-year change, return on capital employed (RoCE) and return on equity (RoE).

Industries outperforming the Nifty 50 index include shipping, electrical equipment and construction & engineering industries. These industries outperformed the Nifty 50 index by 91.2, 86.8 and 66.1 percentage points over the past year respectively. Two stocks each represent the other electrical equipment and construction & engineering industries.

Major stocks that appear in this screener are Power Finance Corp, Apar Industries, The Fertilisers and Chemicals Travancore, Rail Vikas Nigam, Mazagon Dock Shipbuilders, Olectra Greentech and Polycab India.

Among the stocks in the screener, Power Finance Corp has risen the most over the past year by 261.7%. This has helped the stock outperform its finance industry by 175 percentage points. The company has also outperformed its industry in terms of return on capital employed (RoCE) and return on equity (RoE). Strong power demand and government PLI schemes have helped power sector financing companies.

Apar Industries has outperformed the other electrical equipment industry in year change % by 114.2 percentage points owing to a 218.1% surge in its stock price over the past year. The stock has been on the rise for the past year thanks to premium product launches and growth in exports. This has helped the company to register a net profit CAGR of 35% over the previous five years.

You can find more popular screenershere.

The Baseline

21 Dec 2023

Chart of the Week: Nifty 50 rises 17.3% in a volatile year, set to close 2023 in the green

By Akshat Singh

As we near the end of 2023, the Indian benchmark index, Nifty 50, is set to close in the green for an eighth straight year. The rise in the benchmark index has accelerated in the past month, arising 7.6% to hit new life-highs. There’s been a shift in mood from the previous year, when most of the global indices were under pressure amid high inflation and recessionary fears.

In this edition of Chart of the Week, we will be looking at India’s benchmark index, Nifty 50’s performance in 2023. As of December 21, the Nifty 50 is up 17.3% over the year, despite facing global inflation, recessionary risks in the US and Europe and conflicts in Ukraine and the Gaza Strip.

According to the International Monetary Fund (IMF), India is expected to be among the fastest-growing economies in 2024 with a projected growth of 6.3%, thanks to its fast-growing middle class that is driving consumer spending.

Nifty 50 gets off to a good start in 2023, but Hindenburg report crashes Adani stocks

2023 started well for equity markets, as Federal Reserve Bank of Chicago’s CEO Charles Evans hinted at a slower rate of increase in interest rates. Due to this, the Nifty 50 rose 1.4% on January 9.

This rise was later offset by the benchmark declining 2.4% during the week ending January 22, due to Hindenburg's short position and explosive report on Adani group stocks. Hindenburg's report accused the group of stock manipulation and accounting fraud. In addition, the SEBI moved to the Supreme Court with regards to the NSE’s co-location scam involving its previous chief Chitra Ramakrishna, which led to a 1.2% fall in the index on January 25.

On January 27, the Nifty 50 continued to fall by 1.6% due to the US GDP rising by 2.9% QoQ in Q3FY23, lower than the previous quarter's growth of 3.2%. This raised fears of a global recession.

However, the index recovered with a rise of 1.4% on February 3, as the growth rate of the Indian services sector in December remained above the long-run average (53.5). The positive upturn was linked to good demand conditions.

The Nifty 50 fell 1.5% on February 22 on fears of the US Federal Reserve hiking its interest rates. The Nifty 50 fell by 2.7% in the week of February 19. The Adani-Hindenburg effect started fading on March 3 with the index rising 1.6%. This can also be attributed to a 5% rally in the Nifty PSU Bank index on the same day, following the central government's 'bad loan initiative'.

Improved sovereign rating limits India’s exposure to the Silicon Valley Bank crisis

The US-based Silicon Valley Bank declared bankruptcy on March 10, leading to a fall of 1.5% in the benchmark on March 13. The Nifty 50 rose by 1.6% on March 31, after Morgan Stanley upgraded India to ‘Equal-Weight’ citing reduced valuation premiums and a strong economy.

In the week of June 25, the Nifty 50 rose 2.8%. This rise was due to the Reserve Bank of India pausing its rate hikes and weak production data from China. Various restrictions on Chinese goods by the US and other countries shifted supply chains to India and lowered production for China. The Nifty Bank and Nifty 50 indices hit their respective record highs.

There continued to be some pressure on the index, however, with Nifty IT falling by 4% due to pessimism and poor earnings by some large-cap IT companies like Infosys (which fell by 8%).

Israel-Hamas conflict raises volatility in markets

The Israel-Hamas conflict intensified on October 7 after which the index fell by 1% and 2.5% in the following weeks of October 15 and 22. The bearish streak was broken by the dovish stance of the US Federal Reserve, as it indicated that its interest rate hike cycle was coming to an end.

In the week of November 26, the index rose by 2.4%. Master Capital Services attributes the impressive rise in the index to a combination of factors. A more dovish Fed, and the return of Foreign Institutional Investors (FIIs) buying Indian stocks, as well as significant investments by domestic investors, boosted the index. Investors put in Rs 11,139 crores into the cash segment for November.

BJP state wins ahead of general elections drive Nifty 50 to all-time highs

On December 4, the index rose 2.1% as the BJP won three out of four state elections, Rajasthan, Madhya Pradesh, and Chattisgarh. Nuvama Institutional Equities says these results reduce the chance of a change in power at the center. On December 13, the Federal Reserve kept the interest rate constant in its policy meeting. This led to the market rise by 1.2% on December 14.

As we head into general elections in 2024, Nifty 50 is set to scale new highs. In seven of the previous eight instances of an upcoming Lok Sabha election, the average gain over six months leading up to the election period was 15.3%. It remains to be seen if investors will get lucky this year as well, considering that much of the gains may be baked in, and the indices are already near all-time highs