There are always two sides to a coin and it’s the same with market movements. One view will be that the market movement, as mirrored by the Sensex, has gone up by 317 points over the last one month having closed at 38845 on 18 September. The other would be that the market seems to be in a pause mode, having gained just 1.2 per cent during the period. After gaining nearly 13,000 points in six months from a level of a little under 26,000, some tiredness is bound to creep in. Will it resume its onward march after a pause? There can be no clear-cut yes or no. Analysts are cautious and advise people to book profits. Prashant Joshi, co-founder, Financial Research and Advisory Services, Fintrust Advisors, says: “Even in normal times where there is a run-up in the equity market and the portfolio accumulates a minimum of 20 per cent gains, it is advisable to book profits.” Joshi rationalises that considering the uncertainty and volatility, where predicting the market even three months down the line looks like a mammoth task, it is prudent to keep cash in hand. Of course, the market has its own mind and no amount of coaxing by FPIs or DIIs can change its course. For the record, FPIs have drastically slowed down their investments. In the month of September, they have been net buyers of only Rs1,276 crore. From January, however, they have invested around Rs86,000 crore, which is higher than the investments in the last five years. Even over a longer period, FPI investments have crossed Rs1 lakh crore on only three occasions in the last decade. Will India continue to remain the favoured market for FPIs? DIIs have been net sellers of over Rs5,000 crore. DIIs have been net sellers in July and August, so they have maintained the trend. What is surprising is that India, despite the 1.2 per cent gain, has been the best performing market in the last one month as compared to Brazil, Russia, China and South Africa. One important factor is, of course, the easy availability of liquidity. With the UK also looking at negative interest rates, one can expect more flows to come to the emerging markets where India is favourably placed. The other factor is that the pandemic has also been beneficial to the markets, with more funds coming in from new investors. The declining rates in the banks will also foresee more domestic money, especially from the salaried class, flowing into riskier assets, either directly or through mutual funds. With avenues for investments drying up in real estate which is going through a real torrid time, investors are flocking to the markets. Even money which would have otherwise been invested in regular trade and business, is flowing in. While larger companies have no problems in commencing full production, trade is still in a virtual comatose position. Ahead of the festive season, there is hope of a demand revival in consumption goods, especially brown goods and white goods. Dussehra is on 25 October and Diwali is in mid-November. This is one reason why advisors are a little cautious. Says Tejal Gandhi, a Mumbai-based certified financial planner, (CFP): “Everyone is expecting a correction. However, I do not expect the correction to be steep or last long. Investors are required to ride the volatility rather than trying to trade on it.”
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