Geojit Financial Services Ltd

💼 The week ahead is likely to be highly volatile. 💼 Many events like the Fed meeting outcome on Wednesday, the spike in the US 10-year bond yield to 4.3% and the possible SEBI directives based on the stress tests in mid and small cap schemes will influence the market in the near-term. 💼The Fed meet outcome will be keenly watched even though the consensus is no rate action. 💼If the Fed message has any slightly hawkish tone in response to the recent stubborn inflation trend, that would be negative for the mother market and consequently for other markets too. 💼The spike in US 10-year bond yield to 4.3% is negative for foreign portfolio flows. 💼The concern regarding the elevated valuations in the mid and smallcaps continues despite the stability witnessed in these segments last Friday. 💼Investors may adopt a wait and watch strategy and may buy largecaps in capital goods, banking, telecom and automobiles on dips. . . . #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate

💼The rebound in the market yesterday after the Wednesday crash is unlikely to sustain. Brent crude rising to $85 and the 10-year US bond yield spiking to 4.29% are headwinds for the market. 💼Results of the stress tests conducted by the mid and small cap schemes of mutual funds expected today will be keenly watched by the market. 💼If there are clear signs of stress there can be regulatory action by the SEBI, which will impact sentiments in the broader market. 💼Even without stress tests one thing is clear: the broader market valuations are expensive and in some pockets valuations are frothy. This is clearly unsustainable. 💼Even when prospects for certain sectors are good, valuations have run ahead of fundamentals. Low floating stock in many segments has resulted in prices shooting up. 💼Investors should understand that high quality largecaps with good growth prospects are available at fair valuations. Focussing on such stocks would be safer than chasing smallcaps with stretched valuations. . . . . #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate

💼 The lesson from market history is that frothy valuations are unsustainable. Therefore, the blood bath in the broader market which happened yesterday is hardly surprising to sane minds in the industry. 💼 Investors should appreciate the following facts. 💼The Nifty Smallcap index is down 13.5% and the midcap index is down 6.8% from their respective peaks. But Nifty is stable with a minor cut of only 2.1%. 💼There is room for the broader market to correct more since the valuations continue to be elevated. 💼Investors should now focus on largecaps and quality midcaps. The turbulence in the market will give cherry picking opportunities. 💼From now on irrational exuberance will take a back seat and rational valuations and quality will be the driving force. This turbulence will separate the men from the boys. 💼High quality private sector banks and the leading names in capital goods, telecom and autos can be accumulated in a calibrated manner. 💼It is important to understand that India’s macro fundamentals continue to be good and the bull market is in tact. . . . #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate

💼 In the near-term investors should focus on the sustained weakness in the broader market, particularly the Smallcap segment. 💼The excessive valuations in these segments driven by the irrational exuberance of retail investors has been a concern for many months now. 💼But it has taken the strong message from the regulator SEBI to trigger a correction in the Nifty Smallcap index by 10% from the February 8th peak. 💼It is important to understand that 396 stocks are in the lower circuit indicating that there is more pain to come in this segment. Actions from mutual funds also indicate the excessive valuations in the broader market. 💼ICICI Pru has joined two other leading funds in stopping lump sum investments in their mid and smallcap schemes. More are likely to follow. 💼The net impact of this shift would be more money flowing into largecaps. Largecap outperformance is likely to continue. . . . #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate

💼 The dominant trend in the market in the near-term is likely to be the underperformance of the broader market, particularly the small cap space. 💼 Since restraint imposed by some mutual funds by stopping lump sum investment into their small cap schemes has failed to stem the flow of funds into the over valued small -cap segment, SEBI has stepped in with regulatory action asking the mutual funds to do stress tests in their mid and small cap schemes. 💼More follow up actions are likely from the regulator to prevent a bubble formation in the broader market and its inevitable burst. 💼Since the market is scaling new highs consistently, the undertone of the market remains bullish and, therefore, investors should remain invested. 💼Large caps are likely to witness buying on dips while the broader market will face headwinds. . . . #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate

💼 There are some distinct trends in the market now. One, large caps are outperforming mid and small caps. 💼 Two, Bank Nifty is emerging stronger led by private sector majors like ICICI Bank, Axis Bank, Ind Sind Bank and Kotak Bank. 💼 Three, regulatory action on some NBFCs have impacted sentiments in the entire NBFC space, which, in turn, is improving sentiments in the high quality private banking space. 💼The 3.7% decline in the small cap index this week when Nifty appreciated by 0.5% is big underperformance. 💼This trend is likely to continue since valuation in the broader market remains highly elevated and the regulator has sent a clear message regarding the froth in the segment. 💼Therefore, investors have time, even now, to switch from small caps to fairly valued large caps and partly to fixed income products. At this stage in the market, safety should be given priority over return. . . . #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate

💼A significant recent development is the liquidity in the banking system moving from deficit to surplus. 💼This is positive for banks, particularly those which are facing constraints in raising deposits to match credit growth. 💼The impact on the market would be the outperformance of Bank Nifty over Nifty. 💼Another trend which has started is the underperformance of the small cap index. This trend also is likely to continue since small cap valuations continue to be excessive. 💼Nifty is likely to consolidate at around the present levels. Dips will be bought since institutional buying has been strong. 💼Sentiments are a bit weak in the NBFC space due to RBI’s restrictive actions against some NBFCs. . . . #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate

💼 While the market is steady the small cap index is showing some strain with a cut of 0.5% yesterday. 💼Perhaps there is some selling happening in small caps in response to the SEBI advisory to mutual funds flagging concerns of excessive valuations. Weakness in the small cap segment is likely to continue. 💼The Chinese National People’s Congress which has begun will be keenly watched by the markets. 💼Announcements relating to the initiation of growth suimulating reforms has the potential to attract big money into their stock market, which is now trading at cheap valuations. Therefore, it is important to watch out for developments in China. 💼While there is fundamental support to the Indian stock market, high valuations can constrain further rally. The market is likely to remain range-bound in the near-term. As expected RIL has crossed Rs 3000 level. . . . #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate

💼 The massive 350 point rally in the Nifty on Friday was primarily driven by the far better-than-expected Q3 GDP numbers which came at 8.4% YoY. 💼 This hot number which indicates strong momentum in the economy triggered short covering leading to the 350 point spurt in the Nifty. 💼While the GDP numbers are good it is important to understand that there is a statistical aberration in the numbers. The GVA in Q3 is only 6.5%. The big differential is due to the 32% spurt in indirect taxes. 💼It is also important to remember that the consumption numbers are tepid. In brief, there is room for optimism but there is no case for unbridled bullishness. 💼The SEBI advisory to mutual funds regarding the excessive valuations in the mid and small cap schemes is likely to restrain the performance of the broader market. 💼 The irrational exuberance in the broader segment has no fundamental justification. . . . #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate #StockMarket #inflation #EconomicOutlook #InvestmentOpportunity #EmergingMarkets #MarketUpdate