Stock market investors turn cautious ahead of budget as risk aversion increases

 

History suggests that India's stock markets are likely to see muted trading ahead of the budget

Stock investors in India are bracing for challenging weeks ahead of next month's unveiling of the government's Union Budget as economic growth retreats from its peak and resumption of selling by foreigners weighs on local stocks.

After underperforming most Asian and emerging market peers last year, India's $3.4 trillion stock market is already capped for 2023 as China's reopening attracted global funds to North Asian markets following a record selloff.


History suggests India's shares are likely to see generally muted trading ahead of the federal budget reading on February 1, with data compiled by Bloomberg Intelligence showing an average decline of 1% in the month before the budget since 2003. is showing

According to Bloomberg Intelligence analyst Nitin Chanduka, Chinese stocks have been trading at much cheaper valuations than their South Asian counterparts this year, prompting global funds to opt for "strategic rotation". That of Chinese equity. The choice is clear."

India's benchmark S&P BSE Sensex index fell nearly 5% on Tuesday from its all-time high in December, with foreign funds selling a net $595 million in local equities this month through January 9. The country's stocks outperformed most major markets during the past. Two years as individual investors piled up during the pandemic.

"While selling by foreign investors is picking up pace, the concern is that they are reducing positions across sectors, including banks," said Abhay Agarwal, a fund manager at Mumbai-based Piper Serica Advisors Pvt. He said that 2022 but it is unlikely to repeat this year.

“The biggest pressure on the market in the near term is the continuous selling by FIIs for thirteen consecutive sessions, which has cumulatively sold ₹16587 crore in the cash market. High valuations in India and attractive valuations in markets like China are prompting FIIs to sell in India and invest in cheaper markets. Even though this is a short-term challenge, it can also turn out to be an opportunity for long-term investors," said VK Vijayakumar, chief investment strategist, Geojit Financial Services.

"Last year also, FIIs sold heavily in the initial months and DII/Retail, who absorbed all FII selling, made huge profits when there was a market correction. Bank stocks fell due to FII selling, but The segment is doing well and Q3 results will be better. Be good. The market will respond to the results."