Moneycontrol Pro Panorama | The indomitable faith of domestic investors

Concerned investors will seek reassurances through electoral wins in the upcoming state elections.

Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of. 
As India concluded its mammoth general election, domestic investors upped their bets in domestic equity markets. Equity mutual funds saw
record inflows in May and total assets under management reached Rs 59 lakh crore.

The massive inflows have helped equity markets overcome the election results disappointment. The benchmark Nifty 50 index is back at pre-election result levels. “The sanguine reaction of domestic non-institutional investors reflects their unshaken faith about high returns from the equity market,” Kotak Institutional Equities said in a note.

Indeed, the formation of the NDA government and reappointment of earlier leaders in crucial ministries assures policy continuity. Speculation that a resurgent opposition and a reduced majority will force the new government to step up welfare measures sparked buying in shares of consumer goods and so-called defensive sectors. Read Anubhav Sahu’s piece on how foreign investors should be viewing the market as a new Modi government takes charge.

Apprehensions about the new coalition government and future budget spending persist. Concerned investors will seek reassurances through electoral wins in the upcoming state elections.

“From the perspective of politics, the markets will watch out for the performance in three assembly elections in the states of Maharashtra, Haryana and Jharkhand that are scheduled later in the year,” Nomura research said in a note. The BJP-led NDA coalition lost significant vote share in three states.

Outcomes in the upcoming state elections can play a significant role in determining stock market returns in the next 1-2 years. Especially given the backdrop of massive re-rating of the Indian stock markets in the past five years.

As analysts at Kotak point out, the large inflows into equity market have driven up prices and valuations of mid cap and small cap stocks. Further loss of political ground for the ruling NDA in Maharashtra and/or Haryana can trigger a policy rejig and temper market expectations. That is the risk that investors need to watch out for.

Investing insights from our research team

Home First Finance: Consistent numbers to support valuation re-rating

Medanta: Why the recent stock correction offers value

Has Nazara Technologies hit a snag?

What else are we reading?

MC Inside Edge: Data centres are the new oil, order won or in-the-pipeline, fund managers cautious on QIPs, Emperor’s favourite

Why a hawkish RBI will prevail over a dovish MPC

Underwhelming stock market response as Apple unveils its much-anticipated AI strategy

Chart of the Day: How AI is driving cost saving expectations at GCCs

Follow big money moves to know which way the wind is blowing

SEBI's stock selection criteria: A double-edged sword for the derivative market

As retail inventory falls, India must up its game in global cotton textiles

AI can pick stocks better than you can (republished from the FT)

How Hindu nationalism is intrinsically linked to the national consciousness

Modi stamp intact: Portfolio allocation represents continuity and the promise of stability

NDA 3.0 banks on continuity and experience

French Election: Emmanuel Macron plays fast and loose with investor faith

Technical Picks: Dhanuka, Vedanta, Cipla, Cipla, and Zinc (These are published every trading day before markets open and can be read on the app). R Sree Ram
Moneycontrol Pro