Nifty to test 20-year-old record in March as FIIs, retail investors play bear

NEW DELHI: Returns in the stock market do not move in a linear fashion but Nifty has never given four consecutive months of negative returns in the last two decades. The record will be put to test in March with both FIIs and retail investors turning their back on Dalal Street.

As inflation is turning out to be a monster too big to be tamed so easily by central banks, FIIs have sold Indian stocks worth over Rs 34,500 crore so far in the calendar year 2023. Dalal Street's own army of lockdown traders and investors, who have been religiously following the buy-the-dip mantra, are now finding debt more attractive than equity.

The daily cash market average volumes of non-institutional investors are now at its lowest level since March 2020. In the last 6 months, 38 lakh retail investors have exited the stock market which has been giving negative returns. Fixed deposits, on the other hand, are becoming attractive as interest rates continue to rise.

After losing 3.5% in December and 2.45% in January, Nifty has lost around 1.5% so far in the month. Going by the track record, Nifty should end on a positive note in the last month of the current financial year 2022-23.

The last time Nifty gave negative returns for four consecutive months was in 2001 (June-Sep).

March, however, won't be a cakewalk month for bulls as F&O data implies that traders have added more short positions in Nifty in the March series. The rollover of positions to the Nifty50 March futures was 73% compared to the 3-month average of 80%. "Major short rolls were seen in the March futures with an average price of around 17860 which becomes a pivot for the month. Till the time Nifty trades below 17860, the positional support for the index is around 17300," Religare Broking said.

On the valuation side, many investors find Nifty to be slightly expensive as compared to other emerging markets where a bulk of the FII dollars are shifting. The December quarter results did little to support valuations.

Nishit Master, Fund Manager, Axis Securities PMS, said the market appears expensive by around 5-10%.

"Our Nifty estimates in terms of earnings for FY24 is around Rs 935 and for FY25 it is Rs 1060 or slightly less than Rs 1060. Now if you factor that into numbers, then you are looking at the markets currently being at around 19 times FY24 earnings and 17 times FY25 earnings, which appear slightly on the higher side," he said.

Global brokerage Credit Suisse also expects India’s near-term equity performance to remain subdued and volatile due to multiple headwinds.

"Nevertheless, we believe the near-term consolidation offers a buying opportunity as we believe that India’s long-term growth outlook is sanguine," it said. The brokerage prefers banks, autos, and cement stocks.

(With data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)