bull market: Which startup could be a wealth creator like HDFC Bank
It has been a good September, a very decent October but in November, a little bit of consolidation and numbness has started. Do you think we have topped out for the year and we may remain like this for the next couple of days, weeks at least for the year now?
It is very possible and there is nothing to be worried about. The Nifty per se, on a one-year basis — and we are not talking about Covid bottoms — is up 40% from a year ago. We track 25 global markets. India is the third best performing in the world on a one-year basis. The two markets that have outperformed us are Saudi Arabia and Russia and obviously that is thanks to the price of crude because they are exporters.
So India has been an absolute outlier and outperformed in the last one year. The biggest driver of global markets is the US where S&P 500 is up 30%. We are talking about investing globally. There is a big euphoria but Indian markets have done much better than that. Even the Nasdaq on a one year basis is up about 34-35%. So the Indian market has been an outperformer. If you start seeing it in relation to emerging markets, which thanks to China, is a subset of the EM index, in the last one year, it is up about 7-8% and we are up 40%. So we have had a massive outperformance relative to global markets, relative to the peers and it is very natural for markets to take some pause.
The correction or the pause can be two ways. One is it can be via price rise and that means the prices can correct 10-20% or it can be time-correction and that means markets can be 18,000, 17,500 or 18,500. I am in the camp that believes that there will be more of a time-wise correction.
The beautiful thing that is happening in India is sector rotation. If some day banking is not doing well, tech does well and vice-versa. We are not seeing a big damage but a lot of churn is happening. We have a time-wise correction and that is getting reflected. There are some global issues also which will put pressure on India in the short term. The strength of the US dollar typically has a knockdown effect on emerging markets and commodities.
The way bond yields in the US are going up, some dark clouds are emerging globally. That will put pressure and that is reflected in the FII numbers. They have been negative for the last two months. If we continue to have a time-wise correction in which there will be good days for some sectors and bad days for another, it will be very good for the market and that will set us up for the next stage.
If the correction is price-wise, the pain comes in. As long as it is time-wise, it is more of a question of patience and as far as patience goes, as investors we have a lot of it and that is really my concern. The big red flags are global,…
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