After climbing to an all-time high of 40,312 on June 4, the Sensex maintained a downward trend in the days to come. It dropped 10.4 per cent from its peak to hit its lowest on September 19 before the recovery happened after the corporate tax rates cuts. The 30-share index surged 1900 points on September 20, logging the biggest single-day gain since May 2009. That may not be enough as experts expect more surprises next month.
In the recently concluded September quarter, the benchmark index has registered the sharpest fall (2.6 per cent) in last 11 quarters. Of these, the index logged gains in eighth quarters and declined in the rest three. Shrikant Chouhan, SVP Technical Research, Kotak Securities says, “On quarterly basis, at one point of time the Sensex was down by 8 per cent from the previous close. Thanks to the finance minister the direction in the market has changed. Since March 2016, the Sensex had not closed sharply lower from the previous close. It happened mainly due to reshuffling that took place on the index on semi-annual basis. Fortunately, out of top 10 companies only one or two failed to perform, while rest managed to run the show. Chouhan expects a better future for the markets in the medium-term. “Next three months could be challenging. The strategy should be to buy on dips,” he adds.
The foreign institutional investors (FIIs), who were on a selling spree for the past two months, offloaded stocks worth Rs 12,419 crore and Rs 17, 592 crore in July and August, respectively. In September, however, tax sops from the government reversed the flow with net inflows of Rs 7,548 crore. However, it did not arrest the overall outflow as the quarter witnessed the second highest quarterly exodus since December 2016. “FPIs have sold heavily. They don’t like uncertainties as it results in greater fluctuation/volatility in market and currency goes on toss. However, the way our government has started addressing to the issue and given corporate tax cuts, it’s a perfect investment scenario/destination for them to bring fresh money in the market,” adds Chouhan.
But domestic institutional investors, especially mutual funds that have been clinging to markets since long. MFs have been net buyers in equities for the last 22 quarters as opposed to FIIs that have remained net sellers over the past eight quarters since June 2014. In the quarter ended September 26, 2019, the mutual funds invested Rs 42,307 crore, the maximum quarterly investments since June 2006. “Our domestic institutions have absorbed the entire selling pressure, which is positive and would help corporates in the long run. Flows are uninterrupted from retail investors via SIPs. It may come down by a small measure but it would not fall below average monthly investments from MFs,” he adds further.