Nifty 50 index oscillated 1,012 points before closing 559 points (or 2.8 per cent MoM) lower at 19,080 in October, notably the steepest month on month decline in CY23, Motilal Oswal Financial Services said in a research.
The global and local markets were jolted by the Israel-Palestine conflict. FII outflows have been sharp in the last two months; however, they were matched by stronger DII inflows. In Oct’23, DIIs recorded the highest inflows in the last seven months at USD3.4b. FIIs saw outflows for the second consecutive month at USD2.7b, the report said.
All major sectors end lower in Oct’23: PSU Banks (-6 per cent), Telecom (-6 per cent), Metals (-6 per cent), Utilities (-5 per cent), and Healthcare (-5 per cent) were the top laggards, while Real Estate (+5 per cent) was the only gainer.
Barring Russia (up 3 per cent MoM), Oct’23 saw key global markets such as Korea (-8 per cent), MSCI EM (-4 per cent), the UK (-4 per cent), Japan (-3 per cent), China (-3 per cent), Brazil (-3 per cent), India (-3 per cent), Indonesia (-3 per cent), the US (-2 per cent), and Taiwan (-2 per cent) close lower in local currency terms. Over the last 12 months, the MSCI EM index (+8 per cent) has outperformed the MSCI India Index (+4 per cent). Over the last 10 years, the MSCI India Index has notably outperformed the MSCI EM index by 178 per cent.
Corporate earnings in line so far in 2QFY24, but remain concentrated. Corporate earnings so far have been in line with the performance of heavyweights such as BPCL, HDFC Bank, JSW Steel, Reliance Industries and ICICI Bank, driving the overall performance. However, growth has been led by the BFSI, O&G and Automobile sectors.
With the earnings outlook for Nifty and the broader universe remaining healthy and valuations of several sectors being at a premium to their long-period averages (Industrials, Consumer Discretionary, mid-caps and small-caps), we expect the sector rotation in Indian equities to continue, the report said.
There are significant divergences in performance of large-caps vs. mid-/small-caps and across sectors. We believe that in the midst of volatility over the next couple of quarters, sector rotation could be a more important driver than the general market uptrend.
(Sanjeev Sharma can be reached at Sanjeev.s@ians.in)
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