Moneycontrol
Get App
Last Updated : Jul 03, 2017 12:51 PM IST | Source: Moneycontrol.com

For Sensex, last 10 years belong to bulls in July! Will it be different in 2017?

The Indian market has been on a constant winning streak at least in the first half of 2017. It rose by about 17 percent in the same period. But, next 6 months are unlikely to offer a similar outperformance, fear analysts.

It gets hot in India especially in July and so does the market but in a positive way for traders. The S&P BSE Sensex generated a positive return of up to 10 percent in the last 10 years in the month of July.

In the last 7 out of 10 years, the S&P BSE Sensex closed the month on a positive note. The index rose as much as 10.7 percent in the year 2008, followed by 7 percent rally in the year 2009, and 6 percent gain in the year 2006.

However, it gave negative returns in three straight years starting from 2011. The index slipped a little over 3 percent in the year 2011, followed by near 1 percent drop in the year 2012, and 1.1 percent fall in the year 2013.

Close

“From a historical perspective, July has historically been a good month for traders. The average returns for the month of July have been 3.1% with records dating back to 1990,” V K Sharma – Head, Private Client Group, HDFC Securities told Moneycontrol.

“Normalised returns, by taking out the best and the worst July, come to 2.45%. One of the reasons for better July performance is the monsoon that is usually strong in the month,” he said.

July

The Indian market has been on a constant winning streak at least in the first half of 2017. It rose by about 17 percent in the same period. But, next 6 months are unlikely to offer a similar outperformance, fear analysts.

One reason outlined by most analysts is the uncertainty surrounding the mother of all reforms, goods & services tax (GST). Most experts advise traders to remain cautious as markets could get turbulent and volatile. It also a crucial month from an earnings point of view.

India Inc. will start reporting their earnings results for the quarter ended June from the second week of July. The expectations are muted this time around amid uncertainty around GST.

“Consumer-facing companies will report sluggish growth and even volume declines for the quarter. This could continue for some more time but the decline in stock prices will be viewed as opportunities as inherent demand conditions remain unchanged,” Naveen Kulkarni, Co-Head Research at PhillipCapital India Pvt. Ltd told Moneycontrol.

“Banking and cyclical sectors will be mixed bag on account news flow regarding consolidation and stressed asset resolution but private banks are clearly better placed. Overall, we view the month of July is likely to be more or less constructive,” he said.

Sharma of HDFC Securities expects July to be turbulent and volatile. “We would exercise caution in this month as the implementation can go haywire, considering the complexities of our system, the sheer numbers of the registered users and a system that has not been adequately tested for the magnitude which it is supposed to handle,” he said.

What should investors do?

The setback, if any, will be short-lived. Investors are advised to pick up quality stocks on all declines to strengthen their portfolio.

GST will be a game changer for the economy and benefits companies who are leaders in their space. Sectors like metals, FMCG are likely to benefit the most from the tax reforms.

“GST, in the long run, will make Indian economy more robust and help to grow with the higher momentum. In the month of July investors should invest in those stocks those are trading at attracting valuations,” Omkar Tanksale, Sr. Research Analyst -Institutional Desk at GEPL Capital told Moneycontrol.

“One should see strong value picks rather than news sensitive stocks as markets will likely to remain volatile. Sectors like metals, FMCG will likely to benefit from the tax reforms so after implementation stocks from these sectors will likely to have positive movements. However sectors like auto, jewellers etc. likely to impact negatively,” he said.

Kulkarni of PhillipCapital India Pvt. Ltd said that buy on dips has worked well in the last 2 years and that strategy should continue. “Preference will be for large cap as they offer both value and growth at reasonable price at the current juncture,” he said.

Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.
First Published on Jul 3, 2017 12:51 pm
Loading...
Sections
Follow us on
Available On
PCI DSS Compliant