long-term-investment

What’s in store for you this Samvat 2079?

The Indian markets recovered and boomed in November 2021, followed by a sharp decline of 9-10% from January 2022 until June 2022.

The fall continued, with the single most significant fall of 2.5% in September 2022. Investors have been cautious about what the D-street will offer them during Samvat 2079 Muhurat.

Let us see how the market has performed for every Samvat

samvat se samvat tak
Samvat se Samvat Tak – Nifty performance 
Note: According to the Hindu Calendar, the Vikram Samvat calendar is 56.7 years ahead of the solar Gregorian calendar. Hence, when the Gregorian is in 2022, it is the beginning of Vikram Samvat 2079, which will be post-Diwali next week 
Source: Economic Times, EduFund Research

For global equities, Samvat 2078 turned out to be a challenging year, given headwinds including rate hikes, the energy crisis, the Russia-Ukraine conflict, continued supply disruptions, outflows from foreign investors, and heightened inflation. 

What does the index indicate this Diwali? 

India’s equity market is likely to outperform its global peers in the upcoming Hindu year of Samvat 2079. This will be on the back of improving corporate earnings.

Cumulative profits of the top 500 companies as a percentage of the country’s gross domestic product (GDP) hit an 11-year high of 4.3 percent in 2021-22 (FY22).

This has been a positive sign of revival after the massive destruction caused by COVID-19. 

corporate-earnings-to-GDP-ratio
Corporate earnings to GDP ratio – an all-time high for India with a sharp rebound post-COVID.
Note: According to the Hindu Calendar, the Vikram Samvat calendar is 56.7 years ahead of the solar Gregorian calendar. Thus, when we are in 2022, it is the beginning of Samvat 2079 which is after Diwali next week. 
Source: Economic Times, EduFund Research  

Going by the GST and advance tax collections, for the second quarter of FY 2023, the aggregate revenue for the Nifty 50 companies is likely to witness a healthy double-digit growth of up to 20% year-on-year.

This will be a massive improvement for the seventh quarter in a row and will be led by strong credit offtake. A revival in private capital expenditure due to stocking up of goods before the festive season.  

Amid inflation concerns and higher input costs in India, some of the factors which have worked well for the Indian economy are healthy GST collections, the highest GDP growth in the Asian region, an above-normal monsoon, and strong earnings.

These factors are likely to keep the economy in better shape when compared to other emerging economies, particularly at a time when there is a lot of uncertainty around the global market.  

On the FII and DII movement, the market has seen a heavy withdrawal in 2022 particularly in Q1 and Q2 of CY 2022 due to non-competitive interest rates, geo-political issues, inability to beat inflation, and better return opportunities in other markets.

However, the FIIs generally love pouring money during Muhurat trading due to its favorable market conditions and there have been signs of declining FII withdrawal from the Indian market in Q3. This is likely to provide the much-needed impetus to the Indian market. 

How has the FII/DII participated in the market? 

net-purchase-sales
Note: Net Purchase / Sales of FII/DII in Cash 
Source: Moneycontrol

How are the valuations? 

With the recent correction in the market, and the improving earnings of India Inc. the valuation as defined by the P/E ratio has fallen in line with the long-term average for CY22.

This makes the market more attractive from a long-term investor point of view.

simple-average-ratio
Note: Simple Average is taken for the yearly P/E ratio 
Source: Nifty PE Ratio, EduFund Research 

Particularly for 2022 after April, the valuations have been becoming attractive owing to improving earnings and also correction in the market. 

data-nov-dec
Note: Data for Nov and Dec 2022 is not available 
Source: Nifty PE Ratio, EduFund Research  

What should you do? 

The Indian markets have faced a significant hit and have performed the worst in September 2022 due to rising inflation and interest rate hikes.

However, we believe any correction in the market is inevitable and should be used as an opportunity to acquire more units of investment to make the most of the opportunity.  

The Indian benchmarks are currently trading at rich levels, and we have an optimistic view with regard to the Indian economy’s growth.

This is primarily due to the reforms the government and the Central Bank are taking to beat the rising inflation and improve private capex.

Additionally, we are bullish that several multinational companies have been moving their units from China to India, with Apple starting its facility in India.  

Having said this, one cannot ignore the harsh reality of high inflation, declining currency value, and rising geopolitical issues with tensions between the US and North Korea and Russia and Ukraine.

Also, with a high probability of another rate hike by the US Fed later this year and the depreciating rupee, Indian inflation is likely to stay high next year.  

Thus, it would help if you focused on single names that perform well in a volatile environment and are undervalued, as highly valued stocks are less likely to perform during periods of inflation and high-interest rates.

For investors who are less adaptable to a volatile environment, mutual funds work the best, particularly in the hybrid category with a dynamic asset allocation approach. 

Disclaimer

The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this content constitutes a solicitation, recommendation, or endorsement. Please consult your advisor before investing. Mutual Funds are subject to risk, read the offer documents carefully before investing.

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