While the stock market has fallen by almost 6 percent since the beginning of October, making it the worst decline in stocks after the Covid-led crisis in March-April 2020, market experts say that investors need to moderate their expectations. Continued selling by foreign investors (FPIs) comes amid some consensus that growth prospects in the medium to long term remain strong, bolstered by domestic funds, as before, being buyers in this falling market.
There are, of course, near-term challenges ahead of the market such as the Middle East crisis, weak corporate performance and the FPI sell-off in October, overvaluation of Indian stocks, money flowing into Chinese markets and money flowing from the secondary market to the top. primary market (IPO issues). The market is expected to overcome these risks and regain momentum as seen in the few ups and downs of the last five years. The main positive factor is the huge inflow of nearly Rs lakh crore from domestic institutions led by insurance companies and mutual funds during the month, which attracted any selling FPIs.
“As conditions have changed, the market recovery should now be moderate and there is a dearth of significant pockets to be undervalued. The recent sharp increase in the Chinese markets after a period of underperformance could lead to FIIs diverting flows from India in the near term. With the high volume of stocks, a cautious approach is in order,” said Prashant Jain, CIO and fund manager, 3P Investment Managers.
Mutual funds have been getting good inflows into their equity schemes with investors committing to their structured investment plans (SIPs) – they invested a record Rs 24,500 crore through SIPs in September. Insurance companies, especially LIC which made a profit of Rs 15,500 crore in the stock market in the June quarter, up 13.5 percent compared to last year, are cross-buyers who buy when others sell and vice versa. The state-run insurance major, the largest investor, invested Rs 38,000 crore in the stock market in the June quarter and Rs 132,000 crore in the previous fiscal year.
Analysts generally advise investors to use the ‘buy on dip’ strategy to accumulate shares and equity schemes of fund houses, and not resort to knee-jerk selling due to the current high volatility in the stock markets. Foreign investors who exited the market will return when valuations become attractive again. FPI investment is a serious investment that chases opportunities in various global markets.
While it’s still debated whether or not the sales are over, home fundamentals are still strong. The Reserve Bank of India has kept its GDP growth target at 7.2 percent for the fiscal year 2024-25 as retail inflation remains stuck above 5 percent. Repo rate cut in December will be a booster shot in the market. Corporate performance is expected to improve in the December quarter.
In short, retail investors should not panic and get out; instead, they should remain invested.