Nifty Reclaims 23,000 To Bring Back Sanity And Put Wild Swings To Rest

It's back to normal. The Nifty has reclaimed 23,000. It looks like just a number. However, its significance has many sides. First, the fear and panic triggered on June 4 have been allayed. Second, the ability of domestic investors and institutions to absorb any shocks from FIIs has been demonstrated once again. Third, the market is veering around to the view that the India story is intact, save for near- and short-term volatility.

Let's now look at some interesting data. Who sold and bought, who made money, and who lost money?

On June 3, the exit poll euphoria triggered a massive rally in the markets. FIIs bought shares worth Rs 6,800 crore that day. Remember, they were sellers throughout May. On the same day, domestic institutions, which have been buyers consistently, also bought a limited quantity of Rs 1,900 crore. Dig deeper, and we get a different picture. The non-MF domestic institutions were sellers to the extent of Rs 1,400 crore. This means these domestic institutions made money on June 3.

Who are these domestic institutions? The largest player is Life Insurance Corp. of India. Assuming this is true, LIC made money when the rest of the market was caught in a buying wave.

Now, there's more. On June 4, the markets tanked after they realised the real numbers were not matching the exit poll numbers. The market, read Nifty, lost nearly 6% after losing as much as 9% mid-day.

FIIs turned sellers and sold shares worth Rs 12,200 crore. Domestic institutions were also sellers, to the extent of Rs 3,300 crore. But if we exclude mutual funds, the figure is positive. They bought Rs 3,000 crore. This means the non-MF domestic institutions made money by selling when the markets were on a buying frenzy and buying when the markets were on a selling spree.

Let's now look at what foreign brokerages are saying.

Morgan Stanley

BJP-led NDA retaining its majority keeps policy predictability-something equities tend to thrive on, Morgan Stanley said in a note on June 6.

Share prices have yet to bake in a number of positives, it said, such as India's newfound macro stability, a likely fall in the primary deficit, a growing domestic equity savings pool, improving social equity, a fast-evolving deep tech sector, an impending loan boom, and shifts in external dynamics.

The election outcome is likely to usher in more structural reforms and reinforce the brokerage's forecast of 20% annual earnings growth over the next five years.

While this bull market is ageing, it is still young in terms of returns, especially because we see some distance for the earnings cycle to go, driven by changes already underway in the country, the brokerage said.

And Morgan Stanley signed off by saying this is set to be India's longest and strongest bull market ever. Stay invested.

Jefferies

Jefferies' Chris Wood released his latest 'Greed & Fear: Modi Challenge' note, saying there are enough reasons for Indian market to bounce back in spite of the huge selling on June 4.

To quote verbatim from their report:

Jefferies' Chris Wood released his latest 'Greed & Fear: Modi Challenge' note, saying there are enough reasons for Indian market to bounce back in spite of the huge selling on June 4.

To quote verbatim from their report:

"Still, if there is definitely a risk of renewed share price declines, there is one major positive to be aware of from a flow of funds perspective. That is that foreign investors will view any significant correction as an opportunity to add since a combination of India's outperformance in recent quarters and high valuations, most particularly in the mid-cap space, has meant that most dedicated emerging market investors are no longer overweight the market. Indeed, it is the case that foreign investors have been net sellers of Indian stocks year-to-date. Foreigners have sold a net US$3.98bn of Indian equities so far in 2024, after buying a net US$21.4bn in 2023.''

Now, let's add an expert voice who says if we remove June 3 and June 4, the rest is normal. Sunil Singhania had this to say:

https://youtu.be/GPOPZFUxB8M