Positive Negative Neutral
|Inflation (CPI - India)||Inflation decreased to 6.83% in Aug, 2023 from 7.44% in July, 2023. However still remains above RBI's upper tolerance level.|
|Brent Crude||Brent crude price increased by 10.81% In Sep, 2023|
|Currency USD/INR||Rupee depreciated by 0.40 % in Sep, 2023|
|FII Inflows||FIIs were Net-sellers of Indian equities to the tune of Rs.14,768 Cr in Sep, 2023|
|DII Inflows||DIIs poured Rs.25,017 Cr worth of Indian equities in Sep, 2023.|
|G-Sec Yield||Yield slightly increased to 7.21% from 7.16% in Sep, 2023 end.|
|Global - Inflation||US inflation has slightly increased at 3.2% in July 2023 from 3% in June 2023|
|Valuations-PE||It stood at times in , Oct, 2021 peak.|
|Valuations-PB||It stood at times in , Oct, 2021 peak.|
|Valuations - Market cap to GDP ratio||Current market cap to GDP ratio is at 106%, above its long-term average of 80% but below the peak valuation of 109% in FY 2022.|
High Risk Moderate Risk Low Risk
|RISK FOR EQUITIES||LEVEL OF RISK|
|Rising Oil prices & Commodity inflation|
|FII's being a Net-Seller|
|US FED - Tightening|
|US FED - Interest rate hike|
|RBI-Sucking out liquidity|
EVENTS, NATURE OF IMPACT & ANALYSIS
Mid & Small-Cap Stocks across all sectors have witnessed a strong rally, massively outperforming large-cap segments and now there is discomfort in valuations of Mid & Small cap segments.
Over the years, out of the total market cap of NIFTY 500, Mid and Small-cap segments historically constituted an average of 25% of the total market cap, but it went up to 33% in early September, this year. On the other hand, large-cap stocks constituted the remaining 67% of the total market cap. The Nifty Midcap and Nifty Small cap indices have surged almost 29% and 30% respectively, as on 30th Sep 2023 so far as against an 8% jump in Nifty.
Within the midcap segment, many stocks, especially in capital goods, defense, engineering, industrial consumables, and railway segments of the market traded near their multi-year high valuations range. This surge in the indices was fueled by a decent number of domestic investors chasing the same midcap stocks through the mutual fund route as well as the direct equity route.
Amidst this meaningful overvaluation of the Indices when compared to their historical averages, we felt it was an appropriate time for us to reduce allocation to Midcap funds. We were also of the view that, over the period, it would be difficult to find buyers at high valuation levels for any stock and any negative event/news flow would cause time correction/downtrend in this segment. In case of correction, it will be relatively higher in the Midcap than the large-cap segment.
Small and medium enterprises (SMEs’) IPOs have seen a record run in 2023.
So far this year, 91 companies have raised close to INR 2,327 crore through their maiden offerings on the SME platforms of the BSE and NSE. The capital mobilised through SME IPOs is the highest since their introduction in 2012.
The number of IPOs & quantum of funds raised in 2023 are near to the levels of 2018 (the previous high euphoric period in the SME segment). The growing interest among investors in SME IPOs clearly mirrors high liquidity chasing these IPOs and resulting in higher valuations. Usually, the mistakes in investing are made when there is a higher investor frenzy & overvaluation of riskier assets.
There seems to be no stopping in the value of promoter selling this year.
In our previous Health of Wealth Report, we came across the fact that Indian Promoters are offloading their equity whose value has reached INR 81,000 crore. There seems to be no stopping this tendency.
So far this year, automobiles and components, capital goods, electric utilities, IT services, and transportation sectors have seen the bulk of the promoter selling. However, insurance and IT services accounted for a large portion of promoter selling over the 2018-23 period.
Considering there is high liquidity in Mid and Small-Cap markets the investors are currently highly bullish, whereas the promoters’ move is contradictory towards it, offloading the shares from their respective companies. As a result of promoter sell-down, (promoter holding in the BSE-200 Index has declined to 48.8 percent in the Jun-2023, quarter from 50.3 percent in the Dec-2022 quarter).
How is the monsoon about to end this year?
Since our previous couple of Health of Wealth reports, we have noticed that India is facing an irregular monsoon and August recorded the driest month in over a century. According to the recent reports released by the India Meteorological Department (IMD), rainfall over the country during the monsoon season (June-September) in 2023 was 94% of its long-period average (LPA).
Usually, rainfall of 96%-104% on a long-period average is considered normal with a 2% error margin. Based on this, the year 2023 monsoon is at the lower end of the normal rainfall range on an aggregate basis for the entire country. However, south, east, and northeast India have experienced a rainfall deficit to the extent of 8%-18% and north, west, and central India have received rainfall in the expected range. Going forward, the key monitorable will be RBI’s remarks on the inflation forecast as well as how inflation is going to be tamed.
Medical Insurance premiums are increased by 10-25%.
Medical Inflation, technological innovation, and increased awareness for better healthcare facilities have led the premiums of medical insurance policies to rise by 10-25 percent over the last year.
The increase by standalone health insurers has been much higher at 15-20 percent, whereas for general insurance companies has been slightly lower at 10-15 percent due to their relatively diversified portfolios, industry players said.
Over the years, due to the increase in costs of medicine, medical treatments, and technology enhancements, there has been an increase in the cost of healthcare services too.
Moreover, private health insurance is majorly availed by people from top-tier cities where the increase in treatment costs is also very high. The huge outgo of claims during Covid19 pandemic can be one of the main reasons for the inflationary pressure on Medicare. In addition to that, claim frequency also plays a vital role here which is used to establish premium rates.
However, insurance companies are now anticipating premiums to remain at the current levels for the next couple of years, before another round of hikes and more policyholders possibly opt for an EMI payment option or select covers with smaller deductibles to offset some of the impact of the rise in premiums.
What you should do. And should not.
Please remember investing is mostly backing quality businesses run by quality managements that offer a runway for strong cash flow growth, earnings potential, and long-term prospects. Buying them at a “reasonable” price with an eye on the returns is important. Stay invested, stay disciplined and secure your returns. We have prepared a sound long term holistic financial plan for you based on your risk profile, defined your financial goals along with you… did an asset allocation (with contingency plans built in) with you. We believe we are in the best objective position to help navigate the vagaries of the market.
Standard Warning & Disclaimer: