The Gift of the Electoral Win will come Soon to market

 

By the time you reach the middle of the article, I should have made lots of enemies and fewer friends as of now.

The BJP win builds confidence and enthusiasm within the market to scale new highs. Well, nothing has changed in between except that the political strength and confidence of people get reflected by such great wins. Maharashtra plays a pivotal role in India in all segments. The market will form a plateau over here where corrections will get stalled for a couple of weeks.  The nifty might regain 25000 levels and the bugle of valuation has become reasonable and correction is over etc will sound again. But the truth is that we lack fundamentals and we are living in Alice in Wonderland.

On the other hand, Adani's bugle will keep sounding and will continue which will slowly now fade away under the trumpet of BJP WIN.  Buy at cheap has now turned cheaper. Once it turns cheapest buyers will be lost out of funds to invest. Frankly speaking, we are in the desperation of searching for rationales to justify the retail inflow that keeps coming. Even when Mr. Trump got elected we were in desperation to search positive analytical stories favouring India. Well, that is only true in Alice in Wonderland.

We are just 2 months away from the Budget of 2025-26 and this win will get new tax surprises for the market and most of them over the last few budgets were not conducive for the common people. The gift of the win will be delivered on 1^st Feb 2025.  The winning confidence will only boost the message that common people are happy with the current tax model, where the truth is that salaried segments are the biggest suffers. The corporate sector will be awarded with projects and tax benefits since they have contributed to the win more. Be ready for the gift.

The retail market in India is still searching for optimism and the same is missing as government spending has come down in H1 which got reflected in quarterly results. Most of the companies were surprised by their H1 performance, particularly Q2 FY25. Festive cheers have disappeared now and the market is looking desperately for some dope of optimism so that retail inflows can be kept intact.  The biggest question as of now is when FII’s will come back and if they don’t come back how long the gross SIP number will be Rs.25000 cr. In India when the market falls people stop their SIP hence this behavioural aspect is now under test. Foreign investors currently own 17.5 per cent of Indian equities, while some of its EM peers have as much as 58 per cent foreign ownership.

On the other PMS is also trying day& night to find the reason for optimism and keep the inflow intact. On the other hand, the IPO market is also scouting for strong rationales for listing gains and unfortunately, the grey market is not supporting.  Further, all the IPOs are dependent on the service sector and have little to do with capex hence post returns and prospects of the IPOs are also lacklustre now. Most of the IPOs came up for repayment of debt rather than building new capacities which all add ancillary growth to the Indian GDP.

Why we are trying so hard to search for optimism and keep the retail inflow coming? We want to keep the momentum of easy money-making from the market alive and active as it has since covid lows. We want to keep the notion of easy money-making from the market alive for those 17.5cr new demat account holders who joined the market.

The BFSI sector has been the only boon to survive the weak results of the Q2 of FY-25. (BFSI) sector to prop up overall earnings, with the sector’s share in India Inc. profits reaching 38.2 per cent in the July-September 2024 quarter (Q2FY25), the highest since 2012. This was also significantly higher than the sector’s 23.6 per cent average contribution to overall corporate profits in the past 10 years, excluding the Covid-19 period when the BFSI share rose sharply amid a shutdown of most nonfinancial economic activities. For context, the sector accounted for 57.2 per cent of all corporate profits in the April-June 2020 quarter (Q1FY21). During Q2FY25, while the combined profit of the sector rose 15.3 per cent year-on-year from ~1.08 trillion to ~1.24 trillion, that of non-BFSI companies declined 4.2 per cent Y-o-Y from ~2.1 trillion to ~2.01 trillion.

India is the only country on the world map where EPS is linked to GDP.   We have been driving growth by consumption and government spending. This is not a sustainable model and will not last for longer.  Food inflation is worrisome and the F&O restrictions and other rules which are getting kicked in at different times will have a slow poison impact on the market which is now getting reflected. When will FIIs come back? Well, after Mr. Trump won there are brighter opportunities for growth and prospects in the US compared to investing in emerging markets.  Stronger dollar, proposed tax cuts & higher tariffs make U.S markets the best market for CY 2025. Hence FII’s coming back to India will take time and is dependent on various factors which are yet to get shape or rather take birth.

Well, investing and making money from the market will not be easy as we lack fundamentals. Further, with Mr. Trump now coming up we have to live by his tweets and so as the market. It's time to accept that asset allocation is important and getting back to basics is important now. Quick listing gains and short-term trading turnover will take a hit which will actually benefit the investor's portfolios. It's a time of quality and not quantity. We might be in desperation to search for good momentum news but its now time for a real show of analytical minds to make money and grow wealth.