Samvat se Samvat tak- Stocks resilient on retail participation

Samvat se Samvat tak: Stocks resilient on retail participation

By Joydeep Ghosh

The Indian stock markets braved a challenging global macro environment in Samvat 2078, shrugging aside soaring crude oil prices, to create wealth for investors. On a point–to–point basis, it would seem that the Sensex has not delivered returns – on November 4, 2021, the Sensex was at 60,067.62 points and it closed Wednesday’s session at 59,107.19 points.

For those who were buyers of stocks at Sensex levels of 51,500-52,000, there was big money to be made. Indeed, the markets have held up well so far. India’s PE (price-earnings) multiple is now is at a decade high relative to peers; the multiple is 20x for the FTSE India, compared with 11x for the FTSE Asia (ex-Japan).

The resilience of the equities markets has been attributed to strong retail participation that has defied the persistent selling by foreign portfolio investors (FPI). The number of demat accounts topped 100 million during the year while inflows in MFs via SIPs were strong. That meant local mutual funds were big buyers.

As Nilesh Shah, MD, Kotak Mutual Fund, observed, India’s strong performance was led by the participation of domestic institutional investors, driven by mutual funds.

S Naren, ED & CIO, ICICI Prudential Mutual Fund, observed that while the year has been a volatile one due to geopolitics, quantitative tightening and rate hikes carried out by global central banks, India’s markets have been resilient. “India has handled the macro challenges well. Indian equities are valued among the highest globally which represent a risk factor for those who are valuation oriented,” Naren said. The silver lining, he believes, is that the Indian economy and macros are robust though the markets could remain volatile due to global factors.

“Debt is another asset class which is turning very attractive and investors should not ignore debt and commodities like gold and silver,” he added.

Prakash Kacholia, managing Director, Emkay Global, pointed out the government’s polices such as PLI scheme and the performance of the economy have given investors confidence. Moreover, the participation by retail investors in large numbers has ensured that there was enough appetite for stocks. “While foreign investors sold stocks, much of this was absorbed by retail buyers. The continued inflows into mutual funds via SIPs are an indication of the interest in the markets,” Kacholia said.

Kotak’s Shah observed that the coming year would be equally challenging with events shaping the course of the markets. “Banking and capital goods on a bottom-up basis are likely to outperform the broader markets,” Shah said.