Not sure if it is the start of a bull market or a rally in the bear market, says Vikash Jain of CLSA

Vikash Kumar Jain, India Strategist and India Head of Research, CLSA.

After a steep market correction in the past five weeks, there will be a reasonable interim rally, said Vikash Kumar Jain, India Strategist and India Head of Research, CLSA.

After the market has absorbed several negatives like a weak earnings season, foreign institutional investors (FIIs) moving to China, high inflation, and the Iran-Israel issue, there may be a short-term rally, he said in a media interaction in Mumbai on November 19.

"I am not sure if it is the start of a bull market or a rally in the bear market," Jain said.

Jain says that the initial excitement about China has faded as the country's policymakers appear less aggressive. Until Donald Trump assumes office in January as the new US President , there could be some time for a rally.

Another reason for the rally could be the historical market performance in December. Data from the past 20–30 years show that three out of every four Decembers have delivered positive returns. The median return for the month typically falls in the range of 2–3 percent, making it a generally a favourable period for investors, he added.

Crude oil prices being relatively stable is another positive for the rally, he said.

Also read Urban growth isn’t slowing down; we’re simply looking at the wrong data, says CLSA's Aditya Sonam

On FIIs
Jain says that out of the $900 billion FII AUM (assets under management) in India, over $800 billion is in non-India-dedicated funds. "These funds often react to broader EM (emerging market) trends, especially perceptions tied to China, rather than India-specific developments," he added.

On a relative basis, he says that India may fare better than other EMs during global outflows as fund managers may shift allocations from China to India. However, absolute gains could be limited due to India’s relatively higher valuations, he adds.

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