Moneycontrol Pro Panorama | A tale of two markets

The Indian stock markets look more balanced.

Dear Reader,

Shares of Nvidia surged in the US after the company reported stellar results, quashing fears about demand. Revenues at the designer of the semiconductor chips tripled in the quarter ending January 28. Revenues are projected to grow by a similar pace in the current quarter from the year ago period.

Nvidia results were eagerly awaited by the market participants in the US. The stock, along with other large technology companies such as Microsoft, Meta, Amazon and Alphabet are wielding outsized influence on the US stock market indices. The trillion-dollar valuations of these companies dwarf other stocks in the benchmark indices and are determining market direction.

Thankfully, Nvidia delivered better than expected results. Demand for chips used in artificial intelligence (AI) systems continues to outstrip supply. “Accelerated computing and generative AI have hit the tipping point,” Jensen Huang, founder and chief executive officer of NVIDIA in an earnings statement.

So much so that Sam Altman, chief executive (CEO) of OpenAI is seeking trillions of dollars of investment in AI infrastructure to boost production capacity. Read the Financial Times piece Good luck catching up to Nvidia.

In contrast, the scenario in the Indian stock markets look more balanced. No group of stocks wields too much influence as the so called “magnificent seven” do in US markets.

The economy is growing at a healthy pace. The India Flash Composite PMI rose to a 7-month high in February. The flash PMI shows that India is enjoying the best of both worlds—strong growth momentum and falling inflation, writes Manas Chakravarty in this piece.

The structural drivers that powered Indian stock markets till now--the stable macroeconomic situation, rising equity ownership and sustained

investments from foreign investors—are expected to continue to power domestic equities, says Jefferies India.

The listing of new age start-ups and other companies are improving the depth of the market. The number of companies with a market capitalisation of $1 billion has almost doubled from 264 in 2019 to 481 in 2023, points out Jefferies.

The vibrant markets are attracting greater scrutiny. Coverage of stocks by analysts is rising steadily. This will improve information flow and help investors take informed decisions.

Of course, stock markets are prone to periods of exuberance and excessive pessimism.

The aggregate net earnings of the benchmark index companies are rising at a decent pace. But the sharp rise in share prices has driven up valuations. “While strong earnings growth is supportive of markets; valuations have clearly run ahead of fundamentals in most pockets. Hence, one can be optimistic on the earnings growth front but not on valuations,” writes Christy Mathai, fund manager—equity, Quantum Mutual Fund. Do Read.

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GPT Healthcare IPO: Play on eastern India’s healthcare demand

VIP Industries: Can it be trusted in your investing journey?

Bosch continues to ride on industry tailwinds, valuation at fair level

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Technical Picks: LTI Mindtree, Berger Paints, Bank Nifty and Tata Steel (These are published every trading day before markets open and can be read on the app).

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