Market Outlook – Oct’21

Another Month, Another Life-Time High!

The markets in the month of September continued its bull run and reached a new lifetime high but the run was not without a few hiccups because of fears of a global contagion triggered by a probable default by debt-ridden Chinese behemoth, Evergrande, and the overhang of the Fed’s tapering stance, as well as interest rate timelines, have made investor sentiments swayed by episodes of pessimism and optimism. The Indian market moved around 3% in September and Sensex touched 60k and nifty was close to 18k mark. The major driving force to this rally was the existing liquidity in the market along with the Make in India initiative which is further enhanced by the Production linked Incentive (PLI) scheme which has enhancing manufacturing capabilities in various sectors. The Indian market outperformed all other global markets last month and for the year.

Sectorial performance

Looking at the sectorial performance for the month of Sep, almost all the sectors performed positively along with mid-cap and small-cap rally. There were few sectors which had stellar performances such as Realty, Media and Energy and the only sector which was a laggard was Metal. After shying away from the limelight, power stocks have made a comeback after 11 years. Adding to this excitement is the proposed Electricity (Amendment) Bill which through smart metering, de-licensing of distribution and easy resolution of disputes may change the face of the troubled power sector and the momentum in power sector may continue. Our outlook for the market remains positive mainly because of the strong support from DII and continued accommodative stance by RBI. The sectors which can do well this month include Banking, IT and Energy along with broad-based rally.

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Important events & Updates

Few important events of the last month and upcoming are as below:

  1. The liquidity infusion of $18.6 billion by the Chinese central bank into the banking system in the 3rd week of September cooled off some concerns regarding the Evergrande situation.
  2. The month of October and November is expected to be filled with several high profile IPO such as Paytm, Policybazar, LIC etc.
  3. RBI Monetary Policy Committee (MPC) on October 8 left key policy rates unchanged and retained the accommodative stance in its bi-monthly policy meeting.
  4. The US rating agency Moody’s on 5th Oct’21 raised India’s sovereign rating outlook to ‘stable’, from ‘negative’, while affirming the ‘Baa3’ rating (which is lowest investment grade just above junk status) while re-affirming that a recovery is underway in the Asia’s third-largest economy.
  5. India Vaccination program – India’s biggest vaccination drive update as of Oct 5, number of Covid-19 vaccine doses has crossed 91 Cr and about 18% of the population is fully vaccinated.

Outlook for the Indian Market

The Indian market outlook broadly remains positive for the month as well as the rest of the year even though there might be some minor corrections and volatility. The cheer in the market may continue with upcoming festive season. The outlook for this month on fundamental & technicals are explained.

Fundamental outlook: Even though markets have been experiencing high volatility as the fight been Bears and Bulls continues, The outlook still remains positive and the re-rating of many sectors, especially banking and metals, and corporate deleveraging on the back of strong earnings growth will fuel the upward movement of the index. The RBI is expected to continue its accommodative stance and maintain rates low even though the Bond yields have been rising. The market may see some correction if there is any change in macroeconomic factors.

Technical outlook:  Nifty reached new highs and is on the way to reach 18K by the end of the year. Comeback of the FIIs after a hiatus of 5 months and the support garnered at every dip also hint at the continuation of this optimism in Indian indices and Looking at the technicals there is an immediate resistance at 18100 and major resistance around 18600 levels in the month of Oct. There is immediate support at 17200 levels and major support at 16700 levels. The RSI for Nifty50 is around 78.4 which signify that it is near the overbought zone.

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Outlook for the Global Market

Although most of the Global markets was volatile and underperformed last month, the outlook for the rest of the year remains positive. One immediate concern is the 25% rally in brent crude oil from $64/bbl to highs of $80/bbl in the span of a month, touching the highest level since October 2018. The upmove was courtesy the opening of travel and tourism across the globe causing an improvement in demand amidst limited supply, which led to fears of heightened inflation forcing central banks to speeden up the withdrawal of easy money. This was coupled with a hint by the Fed on increasing interest rates earlier than expected. The US Stock market which was in a rally for the last 8 months has finally seen a dip as many speculated, this was mainly due to sell-off range from the China Evergrande crisis, surging Covid-19 delta variant cases, higher inflation, supply chain worries and the Fed’s plans to buy fewer bonds in the months ahead. The Eurozone growth slowed through the third quarter but looks on track for a return to above-trend growth over the fourth quarter and into 2022. Amid the turmoil regarding Evergrande, China’s authorities sought to reassure investors and observers that it will take steps to avert a significant economic slowdown and the infusion of liquidity into the banking system worth $18.6 billion by China’s central bank also cooled off some anxiety.

Gold Outlook

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Gold price dropped by more than 1% last month and in the month of August gold remained around the 47500-46500 range. The fall in gold rates in the international market impacted the gold prices in India. . The Gold has been underperforming since mid 2020 due to the strong uptrend in Equity market. There is no major trend and it may remains sideways as of now.

What should Investors do?

The Indian market is experiencing some volatility currently and there is still a fear for high valuation as it reaches new highs almost every month for the last 3 months but it has shown its repeated resilience in the face of negative news, such as Covid-related stress, global supply chain disruption, rising commodity prices and the Evergrande crisis etc hence we would recommend investors to maintaining proper allocation based on your risk profile as recommended by advisors. We would also recommend investors to avoid aggressive investments for the time being. We also keep our Investors informed and take timely actions about any major events impacting Indian and global markets. There is IPO buzz and many big and much awaited IPOs are lined up in next two months which will provide Investor with Investment opportunity and listing gains opportunity.

Also read : https://www.mymoneysage.in/blog/reits-real-estate-investment-trusts/

Disclaimer:

This article should not be construed as investment advise, please consult your Investment Adviser before making any sound investment decision. If you do not have one visit mymoneysage.in now.

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