Dear Investors,
Global events weighed on Indian equity market in October 2024. The Nifty fell by 1,600 points to close at 24,205. The Sensex slumped nearly 5,000 points to close below the psychologically important 80,000 level. The market breadth was negative as the broader market underperformed versus the Nifty, with midcaps suffering the most. Almost all industry sectors closed in red in October, as the market awaits the next set of events to get direction.
Uncertainty about US Presidential elections and the Fed monetary policy stance in the regime of the new administration are the main factors behind weakening global risk sentiments. The US market rally (which also fuelled global risk on sentiments) in the run up to the elections was largely predicated on a Republican victory as opinion polls were earlier suggesting. But more recent polls indicate a tight race between the Republican and Democratic candidate. Hawkish comments made by Fed also dampened sentiments as it raised concerns about the timing of rate cuts. The Republican Presidential candidates’ proposed import tariff hike also raises inflationary concerns, which may have implications on the trajectory of future interest. The US 10-year Treasury bond yield rose by almost 70 bps from 3.74% to 4.4% in October 2024.
The Dow, NASDAQ, S&P 500, CAC, FTSE and Hang Seng retreated in October. The DAX and Nikkei were nearly flat. Emerging markets underperformed with MSCI EM Index down 4.4% (versus 0.6% down in S&P 500). India underperformed in the EM basket, as MSCI India (USD) Index was down 8.2% versus MSCI EM Index (down 4.4%). In the EM basket, China continued to outperform India, as India started the month with an equity market valuation premium over China.
Apart from high valuations, weak Q2 earnings relative to Street estimates also contributed to weakening investor sentiments. Net FII sale in October was nearly Rs 88,000 crores. With the sharp correction, the valuation premium with respect to China has narrowed. The correction has also brought down Nifty valuations below its long term historical average.
As far as commodities are concerned, Gold continued its March towards Rs 80,000 (per 10 gram). Precious metals have been the best performing asset class in 2024 with Gold outperforming the Nifty by big margin; Silver has even outperformed Gold. Crude oil firmed up by couple of dollars per barrel, as concerns over the conflict in Middle East lingers on.
Inflation (both WPI and CPI) spiked in September 2024, primarily due to the rise in food prices. The 10 year G-Sec yield rose by 20 bps in October and is currently just shy of the 7% level. On the other hand, the short term bond yields (less than 1 year) eased. With the reversal of the interest rate cycle, the overall situation is favorable for debt markets in the medium to long term.
Financial markets are dynamic, but we will keep adapting to it keeping your financial goals in mind. Assuring you of our best services.
Best Wishes,
Ajoy Agarwal,
(Managing Director)
Login
