Stock market sees its best-ever Samvat in 12 years

FPIs infuse net Rs 1.4 trn into Indian equities, DIIs withdraw Rs 36,682 crore

The liquidity-driven rally in Samvat 2077 has been the best in 12 years, with the frontline indices — the Nifty 50 and the S&P BSE Sensex — surging 41 per cent and 38 per cent, respectively.

The rally in the broader markets has been sharper during the traditional accounting year that will end with Diwali this week. While the S&P BSE Smallcap index surged 83 per cent during this period, the S&P BSE Midcap index moved up 63 per cent.

Back in Samvat 2065, the frontline indices had risen 104 per cent, while the midcap and smallcap indices had appreciated by 123 per cent and 120 per cent, respectively, shows data.

“The equity market had a historical journey in Samvat 2077 as it touched new lifetime highs, with Nifty/Sensex surpassing the 18,500/62,000 mark for the first time. The sprint amid lockdowns and other challenges has been led by a benign global liquidity, containment of Covid-19 cases, a significant pick-up in the pace of vaccination and a sharp recovery in corporate earnings,” said Gautam Duggad, head of research for institutional equities at Motilal Oswal Financial Services.

In the S&P BSE 500 index, more than half — or 298 — scrips outperformed the index, which gained 48 per cent during Samvat 2077. Six Tata Group companies — Tata Steel, Tata Motors, Tata Power Company, Tata Elxsi, Tata Coffee and Tata Chemicals — and four Adani Group companies — Adani Enterprises, Adani Transmission, Adani Total Gas and Adani Power — jumped between 109 per cent and 481 per cent during the year.

In all, 138 stocks in the BSE 500 index doubled.

Among sectors, realty gained the most at 122 per cent, followed by metals (110 per cent) and public sector banks (108 per cent). On the other hand, pharma (19 per cent), FMCG (24 per cent) and private banks (31 per cent) were underperformers as defensives took a breather.

Foreign portfolio investors (FPIs) put in a net Rs 1.36 trillion ($189 billion) in Indian equities during Samvat 2077, the data shows. Domestic institutional investors (DIIs), including domestic mutual funds, insurance companies, banks, financial institutions, pension funds etc., on the other hand, withdrew Rs 36,682 crore after five consecutive years of inflows.

Outlook: Samvat 2078

The sharp rally has made analysts cautious, who believe the Indian stock markets have run up too fast, too soon. Against this backdrop, they expect a correction in the near term, given the rich valuation (Nifty trades at 20.5x FY23 estimates) and the multiple headwinds they face in the short run.

“A correction is long overdue. A 10-15 per cent correction is par for the course and in this decade, only two years did not see at least a 10 per cent correction. The correction will be led by global factors as the market consolidates its sharp gains and central banks start to tighten monetary policy. India will be part of global correction, given its sharp outperformance and expensive valuations,” said Jyotivardhan Jaipuria, founder & managing director, Valentis Advisors.

As a strategy, analysts say stock selection will be key in Samvat 2078 as India Inc battles high input cost pressures that threaten to impact their financial performance. From a long-term perspective, though, equities, they still feel, remain a preferred asset class.

“Equities still remain a preferred asset class in a medium-to-long term perspective. In the near term, too, as inflation pressure rises, the shift to equities from bonds may support buying interest in equities, albeit in select sectors that thrive in an inflationary environment or are less susceptible to input cost pressures and supply chain disruptions. Investors should rotate portfolios toward stocks that can provide better inflation protection,” wrote Jitendra Gohil, head of India equity research at Credit Suisse Wealth Management, in a recent note co-authored with Premal Kamdar.