Nifty50 and Sensex registered a drop of over 1 percent in the first week of 2019 which suggests that we are not out of the woods
Indian markets witnessed a smart rebound in November and December which helped the benchmark indices recoup losses and close with single-digit gains for the year 2018.
Nifty gave merely 3 percent return in INR terms and (-6) percent return in USD terms, and S&P BSE Sensex gave about 6 percent return in INR terms. Now, as we step into 2019, hopes are building up for a string pre-budget rally.
So will the market surprise investors in the first month of 2019? Taking reference from the past – bulls were able to take control of D-Street in five of the last 10 years in the month of January.
Bulls pushed the S&P BSE Sensex higher by 10.8 percent in January, 2012, followed by 6.3 percent monthly return seen in 2018, and 6.09 percent gain recorded in 2015.
Meanwhile, Sensex was lower by 10.8 percent in January 2011, followed by 6.8 percent drop seen in 2010, and about 5 percent fall in January, 2016.
Sensex returns chart over past 10 years
The Nifty50 and Sensex registered a drop of over 1 percent in the first week of 2019 which suggests that we are not out of the woods.
If we look at the global setup, it remains fairly weak. Fears of a global slowdown, upcoming FOMC meeting on January 29-30, and ‘Budget 2019’ or ‘Vote on Account’ have the power to throw bulls off-track.
In terms of technicals, Nifty is now trading below crucial short-term and long-term moving averages which suggest that bulls would now have to do more work to put the house back in order again.
“Technically speaking, the markets shall remain rangebound between 11,000 and 10,500 in January unless a breakout or breakdown is witnessed going forward,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“Events like Vote On Account may not majorly influence market direction as it mainly accounts for expenditure side of government for the next couple of months before the election without scope for announcing big-ticket reforms as priorities to differ from one government to other,” he said.
Foreign investors (FIIs) have mostly shied away from Indian markets in January. Anecdotal evidence suggests that FIIs pulled out money from Indian markets in 6 out of the last 10 years.
They were net sellers in Indian markets in the year 2008 when they pulled out Rs 17,326 crore, followed by Rs 10,968 crore in the year 2016, and in the year 2011, FPI were net sellers for January to the tune of Rs 6,330 crore.
FPIs were net buyers in January 2013 when they poured in over Rs 20,000 crore, followed by 2015 when they invested Rs 17,689 crore, and in 2018, FPIs poured in over Rs 14000 crores.
Even though foreign investors were mostly net sellers in the month of January in the last 10 years, experts feel that the India story still remains intact among the emerging market space which would attract more flows in near future.
“Foreign investors are bullish on India’s growth story. Investors are likely to focus on fundamentals of the economy rather than elections noise to make their investment decisions,” Vipin Khare, Director-Research, William O'Neil India told Moneycontrol.
“FIIs/FPIs were net sellers as they have sold stocks worth Rs 84,946 crore in 2018 till date, while in 2017, they bought stocks worth INR two trillion. April to October months FIIs were net sellers, but the trend has reversed in November, where FII/FPIs were net buyers,” he said.
Fund managers remained net buyers in India markets for the month of January in five out of the last 10 years. MFs poured in nearly Rs 9,000 crore in the month of January in 2018, followed by 2016, and 2017, and 2008 when they bought more than Rs 5,000 crore.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.