EF Digest - February 2024

Dear Investors,

Stock market was very choppy in January 2024. Nifty fell 900 points from its 52 week high, but was able to recover most of the losses by end of the month. The Sensex was down 0.7% month on month basis. Volatility in January was caused primarily by relentless FII selling due to global / regional factors. FIIs have been reassessing their emerging market allocations in face of China’s economic slowdown. Though People’s Bank of China (Chinese central bank) has provided some monetary stimulus, the market is expecting more measures from the Chinese Government.

In international markets, the US stock market continued to be strong with Dow Jones posting 2.1%, while the NASDAQ rose by 1.4%. The MSCI EM Index fell by nearly 5%, with China clearly being a drag on emerging markets. The Hang Seng fell by 9% in January. India was clearly an outperformer in the EM pack, with MSCI India Index gaining 2.1%. In the coming months, India can gain from EM allocations shifting from China but for now, risk sentiments are not very favourable for emerging markets.

In the commodities markets, gold eased slightly to close at Rs 62,590 (per 10 grams) levels, while silver slid to Rs 71,500 (per kg) levels. Crude prices jumped by $5 per barrel due to continuing attacks by Houthi militants on commercial shipping in the Red Sea. Houthi attacks on commercial shipping, particularly oil tankers can be of serious concern since it will increase the landed cost of crude oil in India. While tension in the Middle East is negative for crude oil i.e. higher prices, it can be positive for gold and silver. We will continue to track the commodities market closely and update you.

Bond yields remained firm due to spike in inflation in December and uncertainty about the timing of rate cuts. Bond markets were expecting Fed rate cuts, as early as March, but strong labor market data from the US suggests that we may have to wait till the second half of CY 2024 to see rate cuts. The RBI is likely to follow the Fed’s lead in cutting interest rates. The Budget had negative surprises for the market, despite this being an election year.

Overall, we expect the market to consolidate at current levels for some time before making a fresh move upwards. We may also see a pre-poll rally leading up to the Lok Sabha elections. Investors should remain disciplined and continue to invest through SIPs. It is also important to review your asset allocation and take necessary actions. Our team is at your service to fulfil all your investment needs.

Best Wishes,

Ajoy Agarwal,

(Managing Director)