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The month of July has been volatile for equity investors driven by negative global cues, a rise in delta variant cases across the globe, soaring inflation, the meltdown in Chinese education stocks and constant selling pressure by FIIs. However bumper April to June quarter earnings season lifted the sentiments.
Despite the volatility, the market capitalization of all listed companies on the BSE was at an all-time high close of Rs 235.49 lakh crore on July 30. During the month of July, Sensex touched on an all-time of 53,290 and BSE 500 index hit a new high of 21,895 on July 16. Even the BSE MidCap & BSE SmallCap indices made a new peak of 23,207 (on July 23) and 26,895 (on July 30), respectively.
The volatility capped monthly returns of Sensex at 0.20% in the month of July. However, the party continued in the broader markets as BSE 500 index was up 1.35%, while the BSE MidCap index rose 2.45% and the BSE SmallCap index surged 6.16%.
A closer look at of BSE 500 index reveals that 25% or 123 constituents of its index delivered double-digit returns to investors in the month of July. JSW Energy (up 49.11%), Jindal Stainless (up 47.93%), Gujarat Fluorochemicals (up 47.80%), and Jindal Stainless (Hisar) (up 40.24%) were among the stocks that rallied over 40% in the month of July.
“There has been incessant selling by overseas investors, but the line-up of IPOs, which were received quite well by the markets, helped the markets sustain the positivity. The factors that have been at the core of market activity locally as well as globally have been the recent rise in the pandemic numbers indicating a probable revival in the near future, the Fed stance on monetary policy turning foggier with higher inflation numbers and better growth numbers, but the Fed till looking for better employment data, and the enhancement of Chinese regulatory oversight mainly on tech, and edtech companies, while a political and military stance against China is gaining ground gradually elsewhere,” said Joseph Thomas, Head Of Research, Emkay Wealth Management.
Top gainers
Vardhman Textiles (up 39.67%), Welspun India (up 38.26%), V-Mart Retail (up 38.04%), GHCL (up 37.25%), Equitas Holdings (up 36.70%), Mahindra Logistics (up 35.62%), Happiest Minds Technologies (up 35.25%), Rain Industries (up 34.06%), Zensar Technologies (up 33.90%), Caplin Point Laboratories (up 32.69%), Lakshmi Machine Works (up 32.53%), and Century Textiles & Industries (up 30.02%) were among other majors gainers of the month.
Outlook
The month of August is going to be eventful for US$/INR with Auto sales numbers, PMI figures along the result season will continue to drive stock-specific movements on the markets. The trend in global stock markets, the movement of the rupee against the dollar and crude oil prices will dictate the trend on the bourses in the near term. Investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) will also be monitored.
That apart a strong line up of IPOs aim raise to around Rs 28,000 crore in the primary market will also influence the liquidity in the market.
The key thing to watch out for in the near future would be the US bond yields because any rise in yields can take out the FII money from developing countries like India to western markets and could also be a risk for emerging markets currencies.
“In the week ahead, markets will take support from ongoing corporate earnings season, upcoming RBI’s MPC meeting, Auto sales numbers, and a slew of macro data. On the other hand, the primary markets continue with a flurry of activity as 2 IPOs close this week while several more are lined up for next week,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.
The strong earnings have helped the market to largely sail through the headwinds of a possible third COVID wave, commodity-led inflation and volatility around the US Fed taper talk. Current valuations, while not expensive demand consistent earnings delivery v/s expectations for further outperformance. While the Index may be trading in a tight range, the gradual opening up of the economy and an improved demand backdrop do offer bottom-up opportunities, Khemka added.