EF Digest - October 2024

Dear Investors,

International events dominated equity markets in the month of September 2024. The Nifty closed September below the 26,000 level after heavy FII selling on the last day. FIIs sold nearly Rs 10,000 crores of stocks in the cash market on the 30^th September 2024. The spectacular rally in China after the government in Beijing announced stimulus measures has led to a shift in global investment flows. With China dominating the emerging market basket, FIIs have started booking profits in India and investing in China.

The other keenly watched event in September was the US Federal Reserve’s FOMC meeting. The Fed cut interest rates by 50 bps in September 2024 FOMC meeting and indicated more rates cuts in CY 2024. The market was expecting rate cut and so the rate action was discounted in prices. Major US equity indices like Dow and S&P 500 gained 2.5% in September. Among other developed market DAX gained 2.5%, but the Nikkei and CAC were flat, while the FTSE fell in September. Hang Seng was one the best performing indices in September rising near 15%, in one of the most spectacular rallies since the Lehman Brothers crisis in 2008.

September was a good month for debt market as also as the 10-year Government bond yield further eased by 10 bps. Cooling inflation with WPI inflation at just 1.13% and Fed rate cut has raised hopes of rate cut by the Reserve Bank of India. But the rate cut may not come in the next Monetary Policy Committee (MPC) meeting in October, since the RBI may want inflation to stabilize further. Nevertheless the bond yield scenario is favourable for longer duration debt fund investors.

September was a good month for commodities as gold and silver gained 4.7 – 5.4%. WTI crude oil prices softened to below US $70 per barrel. But sudden escalation of the conflict in Middle East has raised concerns about the trajectory of crude prices in the short term.

As on 4^th October 2024, Nifty has tumbled more than 1,000 points from its peak but found support at the psychologically important 25,000 level. China’s outperformance and the escalating conflict in the Middle East are the major risk factors for Indian equities. Global equity and commodity markets were not impacted much by the year long Israeli operations in Gaza, but the possibility of wider regional conflict has increased risks significantly especially for emerging market stocks. Nifty TTM PE ratio is above the 10 year historical average PE. We expect the market to remain volatile with further selling coming, if the key support level of 25,000 does not hold. Midcaps may underperform large cap stocks.

However, a healthy correction may provide attractive entry point for investors who missed out on the last rally or for other long term investors. You should continue to invest through SIPs and must focus on asset allocation in these market conditions.

Assuring you of our best services.

Best Wishes,

Ajoy Agarwal,

(Managing Director)