Amid turmoil in the global markets and the failure of Silicon Valley Bank and Signature Bank in the US, the Indian equity markets demonstrated resilience and bucked the trend in March by ending a 3-month losing run.
According to Fisdom Research, this shows the potential opportunities in the Indian markets and points to early indicators of risk-on sentiment globally.
Indian markets experienced tremendous volatility in March, with investor sentiment fluctuating. For the first three weeks of the month, the benchmark indices, Nifty 50 and S&P BSE Sensex, posted losses, continuing a three-month downward trend.
The markets did, however, bounce back in the last week of March, with both indices recording gains of 2.45% and 2.55%, respectively. The Indian markets were mostly flat for the month despite this improvement.
The global markets exhibited a varied performance in March, as some indices surged while others suffered losses, according to the report.
India: Sectoral Performance
In terms of sectoral performance in March, utilities have improved as a result of Adani's stock performance, according to a Fisdom Research research. Additionally, largecaps have shown resilience in an unstable environment, displaying the strength and long-term reliability of reputable companies in unstable times.
"The strong performance of the equity markets can be attributed to the notable outperformance of sectors like utilities, oil & gas, and basic materials, primarily driven by the performance of three Adani Group companies. Adani Green and Adani Transmission have shown significant gains, rising by 72% and 48% respectively, leading the rally in the utilities sector. Additionally, Adani Total Gas has witnessed a 21% increase, driving the rally in the oil & gas sector," said Fisdom Research.
In contrast, it's possible that the auto and IT sectors have faced difficulties recently, resulting in negative returns. Other industries, like capital goods and fast-moving consumer goods (FMCG), appear to be displaying robustness and stability in the current year of 2023.
"It appears that the recent trend in the equity markets, as evident from the above information, is driven more by stock picking rather than sustainable sectoral trends. The strong performance of specific stocks within sectors like utilities and oil & gas, particularly driven by the performance of Adani Group companies, indicates that individual stock selection is playing a significant role in influencing sectoral returns. We expect this trend to continue in the near term but in the long run from we expect banking, auto, IT, capital goods & FMCG to perform better," added Fisdom Research.
India: Marketcap Performance
Despite the fact that the stock market is generally in a bearish trend and all of the indices are showing declines, large-cap stocks have demonstrated notable strength and resistance to the downward pressure. Midcap and smallcap companies, on the other hand, have performed poorly in the current market environment.
Adani Power and Adani Enterprises' noteworthy performance, which has exhibited outstanding growth, is one of the crucial factors for the limited downside impact on the large-cap indices.
Adani Power's stock price has significantly increased by 24%, and Adani Enterprises' stock price has significantly increased by 11%.
The market's midcap and smallcap sections encountered difficulties in March 2023, and their YTD results were also disappointing.
"This correction is natural in the current turbulent times, following their significant outperformance in the past. While short-term challenges persist, these segments may continue to offer potential for long-term growth for investors who carefully evaluate their investment choices," said Fisdom Research.
FPI Investments Equity: By Sectors
According to the research report, foreign portfolio investors (FPIs) have also made a comeback with inflows in the services and power sectors, while outflows were seen in the IT, oil & gas, and healthcare sectors.
Foreign Portfolio Investors (FPIs) demonstrated a positive turn in investment attitude in March by infusing ₹7,900 crore into the Indian equity market, giving it a much-needed boost after two consecutive months of net selling. Notably, a sizable share of FPI investments in the Adani group companies came from GQG partners with US locations, signalling a revival in interest in Indian stocks.
The recent decision by Morgan Stanley to upgrade Indian equities to equal-weight was another factor that helped to strengthen sentiment in the Indian equity market, in addition to the FPI investments.
The research company in its report said that this upgrade is viewed as a positive indication for the Indian market because it shows that valuation premiums are decreasing and Indian stocks are considerably more attractive than those of their peers in other emerging markets.
"On a sectoral level, services, power sectors led the inflows while IT, oil & gas, healthcare see outflows. They have consistently bought into infrastructure and capital goods stocks in last few months. We anticipate that this pattern will persist, taking into account the possibility of a rate pause and potential global weakening of fundamentals," added Fisdom Research.