In this month's markets & macros review, we celebrate Sensex hitting 60k!
This is a glorious milestone for Indian markets and the growth story is just getting started. The world is betting on India’s cyclical recovery and the economy is entering a new age with Unicorn startups coming in with IPOs to spearhead the increase in market capitalization. While we are not immune to short term corrections, analysts at Goldman Sachs predict that India is entering a new age of growth similar to China a few years back and we might see new age sectors like ecommerce, fintech and SaaS redefine the markets.
But for now, let’s do a review of the month that was for the Indian markets.
Looking at broad market indices this month, we see that the Midcaps & Smallcaps have outperformed Large Caps and Gold & Bonds are not performing.
The outperformance of smaller stocks is rebound after last month's correction and typically such rebounds in a favorable market last long.
Metals underperformed, IT continued the string performance but the best performers were Media after Zee, Sony merger and Real Estate, which is having a boom.
Energy and FMCG were strong but Pharma and PSU Banks lagged.
Among factors, alpha came back strongly after the correction last month. Quality was strong and Momentum index also made a comeback.
The strong performance of Alpha and Momentum is indicative of the end of the correction in August.
Let’s look at our multi-factor portfolios - balanced, growth & conservative first. We have allocated momentum & growth in 2021, which has led to strong performance.
Among the thematic portfolios, momentum has seen very rapid growth. Smallcaps & Quality have been picking pace recently.
We see good outperformance over the index in all our core and thematic portfolios in 2021.
Earnings are starting in October and we expect strength in earnings for this quarter. With the run up to the festive season and a lot of IPO activity, we expect the markets to stay strong.
The real estate sector seems to be in a sweat spot as it is bottoming out in terms of volumes and prices. Sectors like Hospitality and Consumer Discretionary could also see strength in the festive season as the Covid fears subside.
The IT sector is seeing strong demand and is buoyed up by the Freshworks IPO. The fears from China led to a crash in Metals prices but demand for metals is strong in the growing economy globally.
We are excited about the coming month and the next week’s rebalance should see allocations shifting to favorable sectors.