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Equity markets saw a downturn in November with various events impacting them including the US presidential elections and selling off by the foreign institutional investors (FIIs) last month. This led to increased volatility in the markets.
So, what does the last month of the year have in store for the markets? Let’s hear from the experts.
Anupam Tiwari, Head of Equity, Groww MF
The major events that affected equity markets in November were the quarterly results and the US presidential elections. US and European markets have not performed well in the last year and a half, which affected our exports. Besides this, low government spending, elections and weak monsoon also affected the consumption.
In December, markets will look at the intensity of FII selling, pre-quarterly commentary from companies and the increase in government spending.
The Indian economy is in a great shape. Demand and government spending are increasing. We just need to get used to the introduction of policies by the new US government. We may not see the euphoria of the last 2-3 years, but we may still compound at a reasonable rate.
Fund/sector recommendations
Investors should look for multi cap, mid cap and small cap funds in their portfolio. Depending on the risk appetite, they can also look for sectoral and thematic funds. For an investment horizon smaller than three years, they can also look for large cap and hybrid funds.
We also see opportunities in banking, export, infrastructure, import substitution and premium consumption sectors.
Asit Bhandarkar, Senior Fund Manager – Equity, JM Financial MF
In November, we saw extreme volatility driven by a poor results season. Also, local and US elections seem to have their own impact on volatility.
In the primary market, we see fund-raising activity to rise substantially in the first two weeks prior to a cool off in the second half of the month. Secondary markets may continue to be volatile as we see FIIs reposition their portfolios.
We are cautiously optimistic about the market as we see volatility subsiding as clarity emerges on government capex pace and direction.
As the new administration takes charge in the USA, the market could look for a policy stance particularly on global trade and tariffs. We might look to consolidate our positions in high conviction stocks as the markets move from volatility to clarity.
Fund/sector recommendations
Flexi cap and aggressive hybrid funds could be considered for lumpsum investments. Small cap funds may be considered for SIP investments.
Currently, we are positive on consumption, industrials and financial sectors.
Tejas Gutka, Fund Manager, Tata MF
The Indian equity markets were impacted by several events in November including the recently concluded results season with relatively subdued earnings, US elections, Maharashtra state elections and continued selling spree from FIIs.
December is usually a low activity month for equity markets, especially from foreign investors. With major events like elections and the earnings season out of the way, the focus will be on the pace of revival of consumer demand, especially post the festive season.
As an early indication, the auto sales volumes reported at the beginning of the month will be closely watched. Government policies, both in the US and at home will also be closely watched, especially since government spending has been weaker than expected in the first half of the financial year.
Having said that, equity investors should not be overly worried about the monthly or quarterly market movements as it may lead to suboptimal decision making that can have a meaningful impact on the long-term performance of their investments.
Indian equity markets are in a sweet spot with the macro (growth, inflation, interest rates), micro (corporate earnings, balance sheet, and capex outlook) and political environment being steady. While earnings growth in the first half was slower, it is expected to recover in the second half.
The recent correction in the equity markets has reduced some of the valuation excesses that had built up. Therefore, notwithstanding any external shocks like escalation of geo-political tension or sharp slowdown in growth (either globally or in India), we continue to remain positively biased on the Indian equity market over the medium term.
Fund/sector recommendations
Based on our earnings and valuation framework, we believe that financials, select capital goods and infrastructure segments, healthcare, real estate and ancillary segments and some select bottom-up consumption segments look attractive compared to other sectors.
