Nifty has given just 1.2% return over the past 6 weeks post our cautious stance led by El Nino impact on crops and inflation, low chances of interest rate cut in India, expected increase in interest rates in USA and impending political uncertainty ahead of Lok Sabha elections in India. We believe that the headwinds have increased with recent spike in crude oil prices and rise in Geopolitical uncertainty due to conflict in Israel. Domestic economy is witnessing a clear demarcation with premium and luxury goods witnessing strong demand while basic demand being it due to high inflation. We believe all eyes rest on festive demand in coming couple of months for the market to sustain momentum. We remain positive on Auto, Banks, Capital goods, Hospitals, Discretionary consumption. Risk rewards seem evenly balanced with NIFTY PE discount at 16.7% to LPA while impending El Nino impact and 2024 elections are a key risk. We believe Stable Govt. post elections and continuation of economic policies can take markets to new heights.
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