The domestic stock market went pessimistic this week, particularly in the last couple of trading days, and that was caused by Hindenburg Research’s (a US-based company) unfavourable evaluation of the Adani group.
Ambuja, ACC NSE -0.87%, and NDTV NSE -4.99% are among the ten listed firms owned by Adani that collectively have a market worth of Rs 15 trillion today. The Mcap group has decreased by 23% over the past week.
The performance of banking stocks is being impacted by the drop in group stocks because of the excessive lending exposure. In the past three trading days, the Nifty Bank index has corrected by nearly 6%, falling -8.4% from its 52-week high.
It is projected that the top 5 Adani Group companies have borrowed a total of over Rs 2.1 trillion. According to estimates, 40% of lenders are Indian banks and 60% are from abroad.
Private banks only have a 10% involvement, but PSU banks have a 30% exposure. As a result, PSU Banks’ performance has taken the most blow over the past three trading sessions.
The Nifty PSU index is down around 10% compared to the Nifty Private Bank index, which is down 5%.
The Indian market was in a state of upheaval prior to the news. In reality, it was stationary last week, swinging between +/- 0.5% daily.
Stocks were moving concurrently with the release of Q3 data, and occasionally investors were thinking about projected budgets. Additionally, due to the flip-flopped mentality, even blue-chip companies’ respectable earnings are having a negative impact on the stock price.
The domestic market is not benefiting from the strong success of the international market either. Because markets around the world anticipate a less aggressive monetary policy, the S&P 500 has increased 4% in the previous five trading sessions. Nifty50 index decreased by -2.3%.
As attention is focused on the likelihood of a rise in the capital gain tax, the approaching Budget is also detracting from the Indian market.
Future LTCG Tax reduction is anticipated, and there is disagreement over how it will be addressed in current budget. The market will experience a short-term impact if the tax or holding period are increased.
Second, while the Covid zero-tolerance policy has been suspended, there are more FIIs selling on India as funds move to other EMs and are drawn by the discounted valuation and predicted economic growth overhaul.
Global bourses are rising as a result of the significant correction of the developed market in 2022, the likelihood of a soft landing, and the expectation of a neutral monetary policy. India’s stock is still trading at a premium, and in 2023, earnings growth is anticipated to decrease.
Domestic investors’ perspectives are changing. The Indian stock market has been underperforming so far this year. And now it is thinking about how the poor performance of Asia’s wealthy will have a cascading effect on the overall stock market.
The outcome of the budget is the other factor that investors must take into account. Additionally, the second-tier Q3 results were disappointing, and FII sales increased.
From all four directions, pressure is being applied to the Indian stock market. The basic goal of a savvy investor is to find the stocks or industries that fit their financial goals the best, buy them, and hold them for a long time.
Even though that is the plan, it won’t matter if they are able to do it with the least amount of risk and greatest possible reward.
Even though that is the plan, it won’t matter if they are able to do it with the least amount of risk and greatest possible reward. They are the ones better positioned to profit from the market’s decline.
When the market is extremely booming, they will play cautiously because they have built up a reserve of cash, gold, and debt. For the past year, we have been encouraging people to keep a balanced portfolio. When the general consensus is to sell, the continued upheaval is the ideal time to expand stock exposure.
It is unlikely that the current disarray would prevent India’s economy from growing in the long run. We still have a lot to do and accomplish. There are numerous, highly regarded stocks and industries.
If you have money on the table, now is the moment to begin acting thoughtfully and strategically with a medium- to long-term perspective. If you are a conservative investor, you can postpone the deployment until later and do it in a SIP fashion.
Please note: We don’t have coverage on Adani Group stocks and the points referred to in the article is only as an information and not recommendations.
