What will be the next big trigger for the equity markets?
Due to the Chinese regulators, something unprecedented started happening in China and that did rattle the global investors and investors in China. There was a lot of confusion as to what was going to happen there. In a way, it does benefit India and Indian companies in a big way. We have to remember that in the MSCI index, the Chinese weight is about 10 times that of India but in spite of that, a little bit of shift out of China will definitely help India.
As far as FPIs are concerned, they have been selling in Indian markets for the last couple of months. There is also talk of a third wave of Covid, but as far as India is concerned, there are a couple of things which are happening. One, the monsoon has gathered its momentum back and the kharif sowing is happening as per the schedule. The concerns around monsoon are kind of disappearing.
Also, the lockdown and the panic created by the pandemic is subsiding to an extent and things are opening up across the country; so that, too, augurs well. On top of that, SBI numbers were really commendable and that did bring back cheer to the financial stocks in the earlier part of the week. Overall, it was a good week for Indian markets.
As far as the future is concerned, we believe the bias continues to remain positive. The Chinese action will definitely have the FPIs look at India more. Some of the IPOs which are coming are really good and that is also creating a lot of excitement in the market. The market depth definitely is going up with all these new IPOs coming. Soit is a structural positive for Indian market and do not forget that a lot of retail money is also coming to the market, which is definitely good for the health of the market and it is a long-term positive for the market.
The FIIs have turned net buyers for a couple of days this week. Last month, all of July they were mostly net sellers. What does that indicate and does that also mean we are in the midst of a decisive momentum shifting from smallcaps, midcaps towards the largecaps?
The FPIs are having a very tough time in China. The Chinese tech crackdown is making them extremely nervous. They have lost a lot of money in China in the last couple of weeks and that is making them move positively towards India. India has seen selling for some time and that has got to do with the expected US interest rate movement sooner than expected. But this Chinese crackdown is helping them to come back to India and this is definitely a big positive for India going forward.
Also remember, the move that we have seen in the recent past, they have been looking at the largecaps. Yes, the midcap and smallcaps did go up quite fast and they have reached a level where some of them were looking at price to perfection and at that stage, some of the largecaps were showing opportunities for fresh buying and that is pretty much what they picked up and that is where they started bringing in money. On top of that, some of the largecap companies like SBI and other largecap companies in multiple sectors like Sun Pharma in the pharmaceutical pack and a whole lot of other companies did come up with better than expected numbers. That has also soothed the mood of the FPIs towards largecap stocks rather than moving into midcap and small caps.
Many are saying that perhaps it is the beginning of the end of . How does it really impact ?
If there is a collapse or a public sector takeover of Vodafone Idea, the beneficiary will definitely be the existing private sector incumbents, which is Bharti Airtel as well as Reliance Jio. There is absolutely no doubt about that. But I do not think that augurs well for the telecom industry in the long term. Some amount of competition in the industry is good and it keeps all the players in line and that is the right thing to do. We will have to watch this space.
But that aside, the fact is that Bharti Airtel has been improving its balance sheet and they have been doing the right things. For a minute, if we leave aside India business, the Africa business also has recovered remarkably. They have strategically exited some of the components there and domestic business has started doing well. They have also started increasing the tariffs at different levels. So this is becoming an interesting space.
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