The Signal : The Bull Market Rally – Why and How? – Part I

The polarity between the economy and capital market has been an extraordinaire and one of its kind. On the one hand, we have seen the highest GDP contraction in India’s history, and on the other hand, a remarkable rally of more than ~100% in domestic indices.

The anguish infused by the Covid-19 pandemic had forced investor sentiments to push markets into a panic zone, especially in the month of March 2020, but again it was the same time when sowed the seed for the most significant bull rally in the history of stock markets.

In just a period of approximately 20 months, the Nifty 50 has zoomed by more than 10,000 points.

Since it is widely accepted that no one can print market’s future value, let us also refrain from doing so.

What we will do instead is address key events which is helping markets stay hoisted at current “elevated” levels.

1. India’s Magnetic Macros

Key Macro Economic Indicators (Base Value: Jan 2020 Value = 100)

India’s Macros are carrying solid indicators on the upside, registering growth figures seen in years past. Today, the resilience seen in crucial economic drivers acts as if the Covid event was almost a blessing in disguise!

1. Cropping Up of India Incorporation

This all-around cost control helped the corporate sector raise margins significantly in the quarter’s post-Covid. Even a small cost saving here could provide a structural boost to the bottom line.

The most considerable overhang on the corporate balance sheet was debt; for a change, instead of taking loans, corporate India was repaying loans. A leaner balance sheet has become the latest trend among a host of companies.

Conclusion:

Markets, like history, do not repeat themselves but find a way to repair themselves. It is in the process of re-balancing the scales that the sound and standing investing principles shine. While your judgment of the market prices tomorrow holds as much weight as the prediction of a Magic-8 Ball, you can sure take steps to reduce the extent and effect of uncertainty. Adopt a wise approach to investing when you don’t know, so you don’t give in to temptations. To delay Gratification is to fast-track it.

Today, like every other day, we find ourselves not knowing what’s to come tomorrow. It is in these moments; we advocate to stay put and maintain your risk-based asset allocation.

It is part I, and hence stay tuned for Part II on the “Bull market rally: Why and How?”.

As always, we eagerly await to hear from you. Till then, Happy Weekend.