Strong Festival Season and Rural Revival Expected to Boost Indian Stock Markets: Prabhudas Lilladher
New Delhi [India], August 28: Expectations of strong festival season demand, revival in rural demand, and hopes of interest rate cuts later this fiscal year are expected to support stock markets, according to brokerage Prabhudas Lilladher’s latest ‘India Strategy’ report.
Both Nifty and Sensex have remained buoyed over the past month, holding to their latest bull run, despite rising volatility amidst deteriorating geopolitical situation. Normal monsoons have raised hopes of demand revival in the festival season.
Inflation coming below RBI’s 4 per cent target in July, sustained capital expenditure spending by the government while being fiscally prudent have been lending support to the Indian stocks. Breaching 5 per cent in June, the retail inflation rate in India softened drastically in July. According to the data released by the Ministry of Statistics and Programme Implementation, retail inflation or Consumer Price Index in July was at 3.54 per cent.
Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well. Rural demand has been tepid since the Covid-19 pandemic due to the cautious stance of rural consumers, high inflation, deficient monsoons in 2023, and a shift in consumer spending.
“However, the worst seems over as we are witnessing green shoots in rural demand from the past couple of quarters,” the report said. Liquidity in the Indian markets too remained strong, as foreign outflows are being covered up by the domestic institutional buyers.
“Liquidity remains strong, as domestic inflows have far exceeded FII flows, providing cushion to markets. We believe expectations of strong festival season demand; rural revival and interest rate cuts will provide support to markets,” Prabhudas Lilladher said.
It also believes upcoming US elections are the most important factor to watch out for given rising geo-political tensions globally. The brokerage expects investors to show some tilt towards defensive stocks like consumer, durables, building material, IT services, pharma, and telecom, given high valuations in other sectors. It also asserts capital goods, infra, logistics and ports, hospitals, tourism, auto, new energy, and e-commerce are great themes, but advised investors to be cognizant of valuations.
Nifty today touched its all-time high of 25,115 points. Prabhudas Lilladher sees Nifty moving towards 26,820 points. “We expect market consolidation and recommend selective buying on dips, but quality focus needs to be key criteria,” it advised.
Doubts Revealed
Prabhudas Lilladher -: Prabhudas Lilladher is a financial services company in India that provides research and advice on investments.
Nifty and Sensex -: Nifty and Sensex are two major stock market indices in India. They show how well the stock market is doing.
RBI -: RBI stands for Reserve Bank of India. It is the central bank of India that manages the country’s money and financial system.
Retail inflation -: Retail inflation is the rate at which the prices of goods and services bought by households increase over time.
Domestic inflows -: Domestic inflows refer to money coming into the stock market from within the country, like from Indian investors.
Foreign outflows -: Foreign outflows refer to money leaving the stock market to go to other countries, usually from foreign investors.
Defensive stocks -: Defensive stocks are shares in companies that provide essential goods and services, like food and healthcare, which people need even during bad economic times.
Valuations -: Valuations are estimates of how much a company or its stock is worth.
Capital goods -: Capital goods are large items like machinery and equipment that companies use to produce other goods or services.
E-commerce -: E-commerce is buying and selling goods and services over the internet.
