EF Digest - March 2024

Dear Investors,

Indian stock market bounced back in February 2024 closing the month near the all-time highs. The Sensex gained 1% to reclaim the psychologically important 72,000 level. Nifty closed February near 22,000 levels. FII selling, which was relentless in January, subsided considerably in February signalling improving risk sentiments towards emerging markets, especially India. India’s Q3 (October to December 2023) GDP grew by 8.4%, is a positive surprise, making India the fastest growing major economy. In the medium to long term, we can see higher FII allocations coming to India.

As far as broader market is concerned, midcaps and small caps saw heavy profit booking. SEBI’s advisory to mutual funds regarding froth building up midcap and small cap stocks may have caused the sell-off in these market cap segments towards the end of February. Among industry sectors, Oil and gas, Automobiles, PSUs, Realty, Power and Consumer Discretionary were top performing sectors in February 2024. Banks and FMCG underperformed in February. You should continue to invest in equities with long investment horizons, but keep an eye on valuations and ensure balance of market cap segments in your equity portfolio.

Global markets rallied in February with S&P 500 (US) closing February at its all time high. Japan’s stock market index Nikkei rallied to its all-time high, reclaiming the previous all time high set in 1989. The Chinese market bounced back after months of weakness. The strength in the US market will support Indian equities. In the commodities markets, gold and silver declined in February due to strong US economic data. We expect gold and silver to gain strength in coming months in anticipation of rate cuts and falling US interest rates / bond yields.

As far as debt market is concerned, 10 year Government bond yields eased by around 10 bps. Since November, 10 year bond yields have softened by 25 bps. Cooling inflation will support lower yields, which may go down further with upcoming interest rate cuts. Longer duration debt fund investors can benefit from price appreciation as yields decline. At the same time yields for maturities below 1 year remain firm. Short term investors can lock in these high yields by investing in shorter duration funds instead of keeping your funds in savings bank account or short term FDs.

Overall, we expect the market to 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)