Do it yourself

The first half of the financial year FY26 has been good for financial and commodity markets in general. Despite elevated geopolitical concerns, renewed trade war, slowing growth in major economies and emerging deflationary pressures, stock market, crypto assets, and precious metals, and industrial metals performed rather well. Energy and soft commodity prices were lower, indicating good price control. The global central bankers accordingly remained on the easing path. India however was an outlier in the global context. Indian equities, currency and bond markets were one of the worst performers globally. South Koren equities were the best performing equities in 1HFY26. Chinese and German equities were other notable outperformers. Equity indices of the US, Japan, and the UK also recorded strong gains. The most notable feature of global markets was the sharp rally in precious metal. The central bankers across emerging markets accelerated their gold accumulation, in view of the geopolitica...

2025 is proving to be an interesting year for traders in the Indian stocks. The traders have faced multiple challenges in the past eight months; and had some good opportunities to make extraordinary profit. More notably— What made traders’ life tough ·          The external environment has been volatile. Geopolitical conflicts in the Middle East had escalated materially. The war between Russia and Ukraine continued and developed a new trade/tariff angle for the Indian economy. India engaged with Pakistan in a small but intense war that could have serious long-term repercussions for regional geopolitics. These events caused sharp volatility in the market, causing exacerbated margin calls and losses to the traders. ·          The US imposed reciprocal (25%) and penal (25%) tariffs on imports of merchandise from India, making Indian exports to the US significantly uncompetitive in comparison to the tradit...

In the past seven trading sessions, the benchmark Nifty 50 has managed to fully recoup the YTD2025 losses, soothing the ruffled feathers to a large extent. The broader markets have also regained some of the lost ground, though the midcap (-10% YTD2025) and small cap (-15% YTD2025) indices are still in the negative territory. For the financial year 2024-2025, Nifty (+6.5%) has yielded a decent return, which is marginally lower than China (+12%), the US (+10%) and Europe (+9%), but much better than the other Asian peers like Indonesia (-11%), Japan (-6%) and South Korea (-5%). Broader markets in India are also positive FY25 (Midcap +8% and Smallcap +5%). Now the question is “how does the market look from here?”. I shall deal with this question in some detail next week. However, to close this financial year, I must say this. In my view, the collective wisdom of the market in India has appeared to have assimilated all the known events and anticipated developments regarding the economy and ...

Recent interaction with the market participants indicates that the sentiment of fear is now strongly dominating greed. Most of the investors/traders are complaining of pain in their respective portfolios. Indubitably, the portfolio values have corrected noticeably from their September 2024 high levels. However, the damage is far less as compared to the previous major bear market, which lasted for almost thirteen months (2008-2009), followed by a 20-month period of recovery (March 2009-November 2010) and a three-year period of consolidation (November 2010-October 2013). We had a tentative two-year market cycle between 4Q2013 and 1Q2016, before the latest proper bull market started at the end of February 2016. Notably, this bull market has been the longest one (8 years); and it is still not certain that it has ended on 26 th September 2024. Pain-check In my view, the pain from stock price corrections could be of two types – absolute and emotional. Absolute pain occurs whe...

The sentiments of greed (risk-taking) and fear (risk-aversion) are two key factors that determine the breadth and depth of the stock market performance over a short term. In the risk-averse phase usually themes like large cap, defensive, value, dividend yield, etc. lead the market performance. In this scenario, the market breadth is usually narrow; fewer companies raise fresh capital; volatility is low; and market breadth is consistently poor. On the other hand, in the risk-taking phase, themes like small and midcap, growth, cyclicals, etc. lead the market performance. In an environment supporting risk-taking, usually the market breadth is strong, volumes are above average, and volatility is higher. The primary market is very active in this phase, as a larger number of entrepreneurs look to raise fresh capital for growth and deleveraging. The year 2024, however, has seen some divergent trends. Several contradictions prevailed, which not only raise doubts about the validity of the...

The life of equity investors appears to be becoming more tense with each passing day, regardless of the indices scaling new highs. This applies more to the professional investors (fund managers etc.) as compared to the individual investors. I gather from my conversations with the professional investors that they are finding it increasingly difficult to sustain their performance of the past three years. The assets under their management (AUM) have increased multifold in these three years, but the stock of quality investable equity shares has not grown at a matching pace. Some of them have been reluctantly deploying the incremental flows in the limited number of available stocks, resulting in unsustainable rise in prices; whereas the others have chosen to go down the quality ladder and invested in the poor quality or apparently absurdly valued stocks. Obviously, they lack conviction in their portfolios, but continue to hold it and even grow it due to professional compulsions. Arguably, t...

The first half of the year 2024 has been good for global markets. Despite disappointment on rate cuts, geopolitical concerns, sticky inflation, and political changes in many countries, stocks, precious metals, industrial commodities and crypto made a steady move up with very relatively low volatility. A notable feature of the global market movement in 1H2024 was the stark underperformance of Asia ex Japan, even though the Japanese equities being the best equity markets amongst the major global markets. Brazil also underperformed despite a decent rally in commodities. Another notable feature of global markets was the narrow market breadth of US markets. Though the benchmark indices scaled new highs, it was mostly due to parabolic rise in a handful of technology stocks. At present equity markets appear strong on the back of a resilient demand environment, well anchored inflationary expectations and peak interest rates. Fears of earnings failing to match the stock price rise, escalation i...

Yesterday’s post ( No margin for error ) evoked a multitude of thoughts. Some readers have challenged the premise that the broader markets, especially the small-cap stocks, have sharply outperformed the large-cap components of the benchmark indices. They have argued that — ·          Nifty Next 50 Index (YTD higher by ~21%), which comprises the top 50 stocks outside the Nifty50 (YTD higher by ~2.7%) universe, has performed much better than the Nifty Midcap100 (YTD higher by ~9%) and Nifty Smallcap 100 (YTD higher by ~10%) indices. ·          If we exclude private banks and IT services stocks from the Nifty50 universe, the rest of it has performed better than the broader market indices. ·          These statistics (index performance) completely fail to present a correct picture of the market. The narrative that small caps have done better than large caps is mostly...

Equity markets are making new highs every day. Other assets like gold, bitcoin, bonds, cash, real estate, etc., are also performing decently. Logically, investors should be happy and looking forward to a great holiday season. However, multiple interactions with investors and other market participants, over the past couple of weeks, indicate to the contrary. Investors appear stressed for a variety of reasons. Those who are underinvested are suffering from fear of missing out (FOMO). Those fully invested are worrying about protecting their gains, should there be a sharp correction. Those invested largely in defensive large caps (likes of Infosys, TCS, HUL, RIL, Nestle, HDFC Bank, and SBI, etc.) are disappointed to see their portfolios underperforming the friends and relatives who were more adventurous and invested largely in the broader markets. Those who are leveraged are constantly worried about a sharp correction, margin calls, and rising cost of borrowing but are too greedy to cut ...

Have you ever been to the vegetable market after 9:30 p.m.? The market at 9:30 p.m. is very different from the market at 5:30 p.m. At 5:30 p.m., the market is less crowded. The produce being sold is good and fresh. The customer has a larger variety to choose from. The customer is also at liberty to choose the best from the available stock. The vendors are patient, polite, and willing to negotiate the prices. As the day progresses, the crowd increases. The best of the stuff is already sold. Prices begin to come down slowly. The vendors now become a little impatient and less polite and mostly in "take it or leave it" mode. By 9:30 p.m., most of the stuff is already sold, and poor-quality residue is left. The vendors are in a hurry to wind up the shops and go back home. The prices are slashed. There is a big discount on buying large quantities. Vendors are aggressive and very persuasive. Customers now are mostly bargain hunters, usually the small & mid-sized restaura...

  The first half of the year 2023 has been good for risk assets. Despite strong headwinds in the form of aggressive rate hikes, banking sector turmoil, political & geopolitical events and credit warnings, the stock market made a steady move up with very low volatility. Another notable feature of the global market movement in 1H2023 was the stark underperformance of emerging market equities as compared to the developed markets – even though the development markets appeared to be facing serious growth challenges and financial sector stress. The emerging markets like India demonstrated much stronger economic resilience and price stability. Equities and Crypto recorded strong gains in the first half of 2023; while commodities (especially energy), USD and bonds lost some ground. The rally in risk assets though lacks belief of investors, as underpinned by high cash levels. Though at present equity markets appear strong on the back of a resilient demand environment, easing geopo...