India’s major stock market indices, Sensex & Nifty 50 finally broke their respective previous highs and are moving up with good momentum. They are both at lifetime highs with Nifty 50 at 19400 and Sensex at 65480. The broader markets represented by the mid cap and small cap indices have done even better during the last 3 months.
As indicated in our last note, we expect the Indian economy to continue to grow at a healthy rate due to moderate inflation risk, strong macro fundamentals, healthy corporate sector balance sheets, rollout of structural reforms, sound external sector and fiscal policy thrust on capex. FY 24 will be the 3rd year in succession for India to be the fastest growing major economy in the world.
Liquidity in Indian markets has continued to be at a good level. Foreign institutional investors have not relented in making significant investments in India. Financialization of savings remains a strong trend, therefore domestic money continues to pour in and this could be a prolonged movement.
China was expected to grow at a good rate, after lifting strict Covid conditions but has disappointed so far because of the property bubble. Also, their imports have stagnated for the last one year showing weak consumer demand. These factors, along with ongoing supply chain diversification, are beneficial for India.
Overall, it is our considered opinion that a long term bull market in Indian equities has been initiated and these current levels, even after constant elevation for the last 3 months, still offer an attractive buying opportunity for your goals with a time horizon of 3 years or longer. Of course, there will always be corrections and sometimes deep too, but the overall uptrend remains intact. The best way to express this view will be through highly regarded diversified equity schemes. We should always be aware of the risks, as mentioned in our June 2023 note and it is always possible for markets to experience temporary dips. Also with the global uncertainty, some part of the portfolio should always be invested in high-quality short-term debt funds to take care of liquidity and any contingencies.