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Indian equities are set to post their best half-yearly (H1) performance in the past three years with the Nifty 50 and BSE Sensex surging 10.6 per cent and 9.7 per cent respectively in calendar year 2024 (H1-CY24). During this period, the BSE Midcap and Smallcap indexes outperformed their large-cap peers with a gain of 25 per cent and 22 per cent, respectively.
Total 10 stocks the Nifty 50 have outperformed the benchmark, as well as broader indices by surging over 30 per cent in H1CY24. Mahindra & Mahindra zoomed 67 per cent, followed by Adani Ports and Special Economic Zone (45 per cent), Shriram Finance (44 per cent) and Bharti Airtel (43 per cent).
While there is lack of valuation comfort in a majority of small-and midcap (SMC) stocks, the large-cap stocks, according to G Chokkalingam, founder and head of research at Equinomics Research, still have some valuation comfort.
“Nifty trades at around 21.5x its FY2025E EPS of Rs 1,093 and at 19x its FY2026E EPS of Rs 1,249. Several pockets of the SMC segment are over-valued and also the SMC segment as a whole is seeing a historical rally for the fourth consecutive year. That said, the medium-to-long term ‘India stock market story’ remains intact. Healthy GDP growth, entry of new investors, large inflows into the domestic mutual funds and robust growth of GST & direct tax collections augur well are likely to keep investor’s interest in the markets alive,” he said.
Mid, smallcaps steal the show
Meanwhile, as many as 37 stocks from the midcap and smallcap have seen their market value more than double in H1CY24. Of these Waaree Renewable Technologies has zoomed 373 per cent, while, Shakti Pumps, Cochin Shipyard, Transformers and Rectifiers (India) (TRIL) and GE T&D India rallied between 201 per cent and 245 per cent.
“Recently, Reliance Industries, too, has joined the bull bandwagon. That said, the rise in U.S. bond yield can perhaps trigger some large FII selling in the coming days, putting brakes on the rally temporarily. So long as the massive domestic liquidity support to the market continues, there are no potential triggers that can cause a sharp market correction,” he said.
The flow meter
According to data available, domestic institutional investors (DIIs) have pumped in Rs 2.3 trillion in the Indian equities during H1-CY24. Of this, mutual funds contributed 80 per cent, or Rs 1.8 trillion, during the period under review.
DIIs’ inflow, data shows, is almost three times higher as compared to H1CY23, when they had made a net investment of Rs 86,568 crore in equities. However, foreign portfolio investors (FPIs) were net sellers tune to Rs 4,557 crore during H1CY24, data shows.
“Corporate earnings outlook remains extremely buoyant and money is chasing equities. Valuations, however, remain challenging. The markets are likely to remain strong amid intermittent corrections. Assembly elections, regulatory changes (if any) in the derivative segment can have a short-term impact on the sentiment. While investors are always there in the markets, the FIIs who are traders are likely to return on fear of missing out (FOMO),” said Deven Choksey, managing director, KR Choksey Securities.
First Published: Jun 28 2024 | 10:47 AM IST