Banks, midcaps and small caps continue to power stock market rally

MUMBAI: The markets are on a roll and this is the case, as the results of the state elections a week ago indicate that stability will continue after the general election scheduled for five months from now. The markets have gained about 4.5% in the last six trading sessions and are expected to do much more in the next six months.

At that point it would be a good time to look at what could be the sectors or areas where money-making opportunities can be expected.

The demonstration below would have to do with India and its development, growth and Make in India and Made in India. It would be the history of domestic consumption that would be at the forefront of the rebound. It would be India, India and India.

Over the last nine and a half years, the current government has created wealth for its public sector companies. They financed the NPAs of the banks and turned them around. Indian banks have created enormous wealth for shareholders and while it was the troubled exchequer that financed the losses and the government pumped in a huge amount of capital and took stock instead, it is now the government that benefits like the entire population. The banking package has returned multiple times to shareholders. Incidentally, in many of the PSU banks the government stake is well above 74% levels and needs to be sold at the earliest. Railway companies, defense sector companies and insurance companies have made huge profits in all sectors. Retail investors have benefited considerably.

The best-performing stocks in the market have been mid- and small-cap stocks, which earned 3.5 times more than large-cap stocks. This is for the year Samvat 2079, which ended when Diwali was celebrated less than a month ago. With this outperformance, money in the hands of retail or small investors has increased significantly.

Looking at benchmark indices, the resulting rally would have to be led from the front. The current weight of NIFTY has two heavyweights - HDFC Bank and Reliance Industries. Both stocks over the past few months have been quite slow.

Sentiment has finally started to move and is up about 10% from the October 26 lows. The heaviest of them all is HDFC Bank, which has also moved from the low hit on October 26 by about 13%. This has given substantial movement to NIFTY. In the future, these two stocks would also have to occupy leading positions. Incidentally, the benchmark indices have also moved similarly to HDFC Bank.

The highest sectoral weight in NIFTY is that of the BFSI space, which is a little over 40%. A big part of this is HDFC Bank, which has finally started moving. BANKNIFTY is also up about 12% from its October lows.

The stage is now set for a sustained rally over the next six months, with benchmark indices seeing a slow and gradual rise. The increase from 20,000 to 21,000 intraday occurred in six trading sessions. This is not the first time we have crossed 20K, but since the rally that began in late November in futures.

FPIs who had a negative view on the Indian stock markets have changed their mind currently. It is unknown at this time how long they will remain positive and reduce their negative bets; However, his opinion has contributed to a strong rally in the markets.

In the next six months, manufacturing companies that manufacture in India to sell in India, catering to local demand and also export markets, companies involved in infrastructure construction, whether EPC contractors, highway developers or real estate construction contractors.

Infrastructure spending would continue on a large scale. We have all seen air traffic increase in India and Covid is far behind us. The number of aircraft ordered by Indian aviation companies is huge and is in fact boosting the aircraft manufacturing industry globally. This indicates the growth of passenger traffic, new airports and the need to fly.

All of this, which translates into better roads and connectivity, greatly increases the nation's GDP. Urban subway infrastructure is emerging in so many cities that it would change the way urban travel is done. At the same time, the capital goods industry is very busy with new orders at record levels. India is adding capacity in all sectors.

Disposable income throughout the country is increasing and with it aspirations are changing. New aspirations create more growth opportunities and all this would benefit India Inc. Capital markets are doing their job in two important ways.

The first is wealth creation through share price appreciation and the second, which is equally important, is providing capital to a large number of companies looking to grow their businesses. The spate of issues is a telltale sign and it can be anticipated that calendar year 2024 will see a massive increase in issues on the main board as well as the SME platform.

In conclusion, the markets can be expected to do well in the next six months before the election results are released, depending on how the country votes. At the moment, the current government at the Center is in the first position and is expected to win the elections.

The expected rally will occur across all sectors and in various segments such as large, small and mid-cap. The rally would be long, lasting more than six months and ranging between 8 and 12% up from current levels over the next six months. To cash in on the rally or take advantage of it, investors would have to be patient.

Enjoy the rally as it unfolds over the next six months and witness the many milestones it would create along its way.

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