Markets may turn choppy in second half

The markets were turbulent in the past couple of weeks but returns from the benchmark indices, Sensex and Nifty, in the first six months of the fiscal year have been positive for investors.

Experts say it was due to strong corporate earnings, FII inflows and an uptick in the economy. Leading the rally were the realty, industrials and telecommunications stocks.

The S&P BSE Sensex climbed 11.59%, about 6,800 points, to close at 65,828.4, while the NSE Nifty 50 jumped 13.13%, nearly 2,300 points, to end the first half of the fiscal at 19,638.30.

Even the midcap and smallcap indices gave handsome returns and outperformed the benchmarks in the first six months of FY24. The BSE Midcap gained 34.39%, while BSE smallcap advanced 39.34%.

The rally was fuelled by both foreign institutional investors and domestic investors with the former pumping as much as Rs 1.39 trillion in Indian equities while the latter bought shares of Rs 46,060 crore. In comparison, FPIs had offloaded Rs68,970 crore in the first half of FY23 and domestic institutional investors bought Rs 1.46 trillion.

However, experts say that going forward, things may not be so rosy since the global indicators such as crude oil price and the US Federal Reserve’s hawkish outlook, with fears that there could be another rate hike before the calendar year ends may make markets choppy.

The second half can be a little more volatile because of the state and impending central elections, said Deepak Jasani, head of retail research, HDFC Securities, adding that globally, there are concerns about growth, inflation, interest rates and crude oil prices and those concerns may not be wished away in a hurry.

He believes that FPI flows may not be very conducive in the second half because of high interest rates abroad. And in the next couple of months, the inflows may be either flat or negative.

Agreed Vinod Nair, head of research at Geojit Financial Services, ‘The second half of this financial year ending March 2024 would be challenging compared to the first half. Midcaps and smallcaps are unlikely to repeat their first half-performance.’

He said that given crude oil prices have jumped above the $95 levels, things are not looking so bright for a country like India which imports 85% of its crude oil requirements.

‘FIIs may continue to sell in the short term and the global markets remain weak in anticipation of high interest rates. This could adversely impact flows from both retail and high networth individuals, especially in mid and small caps in India,’ Nair said. However, he expects it to be a short-term phenomena.

During the April-September period, gains in realty, industrials and telecommunications indices pushed up the benchmarks. The BSE Realty index led the rally, rising 48.5% while BSE Industrials and Telecommunications gained 44.5% and 40.7%, respectively.

Public sector banks performed well in the first six months of this fiscal year, with Nifty PSU Bank index climbing 41.5%, whereas S&P Bankex was up 9%.

Tata Motors, NTPC, Larsen & Toubro, Bajaj Finance, and Coal India were the top gainers on Nifty 50, meanwhile UPL, HDFC Bank and Hindustan Unilever were the top laggards.