Investment Ideas Note – December 2024 by Wallet Wealth
By Mr. S.Sridharan, Founder, https://www.walletwealth.co.in/
Market Outlook
The most expected US presidential elections were conducted on November 5, 2024. Republican party's candidate Donald Trump contested against the Democratic party's candidate Kamala Harris for acquiring the presidential position and vice president position after an intense pre-election campaign.
Results were announced the next day, revealing that Donald Trump secured 312 electoral votes against 226 electoral votes gained by the opponent, making Trump president of the United States by January 2025.
The results' impact on the Indian stock market was bullish, as the Nifty went up by 3% and the Sensex gained 1600 points. Similarly, the Nifty Midcap 100 gained 4.78% and the Nifty small cap 100 gained 7%. Let's see the performance of key indices in November 2024,
| Index Performance November-2024 |
| ||
| Date | November 1 - 2024 | November 29, 2024 | Gain/Loss |
| BSE Sensex | 79724.12 | 79,802.79 | 0.1% |
| BSE Midcap | 46284.43 | 46070.85 | -0.46% |
| BSE Small cap
| 55622.6
| 55,199.86
| -0.76%
|
Sensex gained only 0.1% in November compared to a loss of 5.79% in October. Similarly, the BSE midcap registered a loss of 0.46% and the BSE small-cap registered a loss of 0.76% in November 2024.
Though the market recovery is better compared to October month, the bearishness was attributed to major setbacks like heavy selling by FII selling, low bi-quarterly earnings, and rising geopolitical uncertainties.
Other reasons associated with market sentiments were policy changes in the Trump administration and the tightening stance on China.
| NIFTY 50 | -1.54% |
| Nifty midcap 150 | -0.55% |
| Nifty Bank | -0.73% |
Another prominent revision in the stock market was the plummeting of the Adani group of stocks following an accusation of the company for bribing Indian officials of around $26 million to gain solar contracts. This eroded the market capitalization of Adani stocks of around Rs.2.24 lakh crore.
| MF/FII activity | FII | MF |
| Equity | -18258.59 | 32154.89 |
| Debt | 875.73 | -33311.39 |
| Total | -17382.9 | -1165.5 |
The FIIs sold equity worth Rs.18,258.59 in November 2024 and bought Rs.875.73 worth of debt securities in the same period. This selling spree has come down from Rs.91.933 in October 2024. There were many reasons why FII's selling was enormous. A weakened Q2 results of companies, a reason for this correction.
Similarly, the Mutual funds bought Rs.32, 154.89 worth of equity and sold Rs.33,311.39 worth of debt securities in the same period. It is to be noted that the Mutual fund buying was Rs.89,740 crores in October 2024.
We need to wait and see if FIIs will start purchasing following the correction in stock prices.
What's in store for us next?
Domestic financial markets are seeing corrections with relentless hardening of the US dollar and equities being under pressure from persistent portfolio outflows. The medium-term outlook remains bullish as the innate strength of the macro-fundamentals reasserts itself. Headline CPI inflation rose above the upper tolerance band in October 2024 with a sharp surge in the momentum of food prices along with an increase in core inflation.
Inflation: Inflation remained a high increase in food inflation. The rainfall received this season was excess, which was attributed to spoil of summer crops leading to a hike in food inflation. The Monetary Policy Commission left the inflation unchanged at 4.5% for the fiscal year. But as food inflation remains high, the RBI might set a higher inflation rate forecast. And the repo rates might remain unchanged as inflation remains high. RBI will wait and watch before it decides on a rate cut since the change of stance to neutral from the withdrawal of accommodation.
GDP: Recent data shows that the country's growth has gone down to 5.4% in Q2FY24 as compared to the RBI's estimates of 7% for the same period. Possible reasons could be reduced government spending after the elections. When the economic outcomes remain lower, the government tries to boost middle-class welfare rather than concentrate on growth policies. This could shrink the advancement of the nation.
The Trump effect: Trump remains an unpredictable president. As per his election promises including imposing tariffs on Chinese goods, cutting government spending, and changing immigration policies can affect the overall economy of the U.S and other countries including India. So the world needs to wait and watch till January 2025 the effects of Trump's acceptance of the position as 47th president of the United States.
RBI Monetary Policy
The Reserve Bank of India on December 6 has slashed cash reserve ratio (CRR) by 50 bps, which was on expected lines, leading to infusion of Rs 1.16 lakh crore into the banking system, but the central bank's Monetary Policy Committee (MPC) has decided with a majority vote (4:2) to maintain repo rate at 6.5 percent, for the 11th consecutive meeting (i.e. since February 2023) on December 6 while continuing with the neutral monetary policy stance. This would help the banks now have additional resources for lending, potentially supporting sectors like MSMEs, agriculture, and infrastructure. The Liquidity infusion could also stabilize short-term money market rates. Neutral stance on the repo rate may help avoid excess volatility in the exchange rate, especially amid global uncertainties.
Equity
The market cap over GDP ratio is currently at 108.64. This shows that the market is modestly overvalued. The zone indicates being a little cautious while investing for a short term.
If the nifty comes below 23000 nifty level, it is advisable to invest more into equity funds. The investors can focus investing on large cap & momentum funds at this juncture.
It is advisable not to invest lumpsum and invest into equity mutual funds over a 20–24-week period. As the valuations of small cap is on the higher side and hence one can wait and watch before investing in small cap. It's advisable to book profits in small caps if there are near term goals. We are of the opine that the large & mid cap funds would outperform the small cap this year.
Debt
The 10-year G-Sec is trading at 6.85% and the 5 Year G-Sec is trading at 6.83%. One can start looking at high quality corporate bonds and banking & PSU bonds with the maturity of 3 years could possibly generate a decent double-digit return. The best time to enter duration management funds would be faring better during this point in time. If one would like to look at parking money for a period of less than 1 year can look at investing in ultrashort/money market funds.
We strongly recommend the investors to avoid credit risk funds now.
By Mr. S.Sridharan, Founder, https://www.walletwealth.co.in/
If you need any advice on investments, do call us at 9940116967.
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Disclaimer: The above information and views are personal and confidential. The information herein is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness, or correctness for any particular purpose. Opinions expressed are of our personal and subject to change without notice.
