EF Digest - November 2023

Dear Investors,

Historically, the month of October evokes some of scariest memories in the stock markets. The worst market crash in history took place on October 28, 1929 which marked the beginning of the great depression. The Black Monday crash of 1987 in the US also took place in October. The biggest crash of the Global Financial Crisis of 2008 also came in October. October 2023 was a volatile month for the Indian stock market. From its all-time high set in September, the Nifty plunged to below 19,000 levels in October 2023, nearly 3% month on month correction.

The market sentiment is bearish now due to the uncertainty about future interest rates. Market experts have described the US bond market to be one of the worst ever in their history. Treasury bond yields in the US are at a 16 year high at around 5%. High bond yields in the US cause risk aversion among global investors because it makes US Government Bonds more attractive relative to other asset classes from a risk / return trade-off perspective. Emerging market equities are affected more by risk-off global investor sentiments.

The other factor affecting the market sentiments is the conflict in West Asia between Israel and Hamas. Though the conflict has largely been restricted to the Gaza strip till now, there are concerns of it spreading to other parts of this sensitive region, which is also the largest oil producing region in the world. Crude prices have remained in $80 / barrel zone, but may spike up if other countries in the Middle East get involved in this conflict.

India underperformed compared to the US markets, but continued to outperform the emerging markets pack, MSCI India USD Index falling 2.7%, while the MSCI EM USD Index fell 3.3% gains. FII outflows continued unabated in October 2023 with net outflows of Rs 21,000 crores. The broader market underperformed versus the Nifty, after outperforming it for many months. This correction in midcaps and small caps can provide a good opportunity for long-term investors since valuations have run up significantly. You should continue to invest in equities with long investment horizon with focus on asset allocation.

In the commodity markets, gold rallied by 6% to Rs 61,000 (per 10 grams) levels while silver remained flattish. We expect the gold rally to continue despite high US bond yields because of the complicated geo-political risk factors which are unlikely to resolve soon. We are seeing signs of weakening global economy, which was expected after a long period of high interest rates. These risk factors will support stronger gold. Furthermore, the festive season and upcoming wedding season in India can lend further strength to gold. Multi asset allocation funds are good investment solutions for adding gold to your investment portfolio.

This time of the year is for festive spirits and celebration with your families. I and my team wish you and your families a very happy and prosperous Diwali.

Best Wishes,

Ajoy Agarwal,

(Managing Director)