Stock Market Set to RISE? FIIs Are Back + 3 Hot IPOs & NFOs You MUST Know- Rahul Jain #marketcrash

Summary

In this November update, the speaker discusses key developments in the Indian stock market, including Nifty's recovery, absorption of negative news like GDP growth slowdown and FII selling, and potential triggers for a short-term rally. They highlight three factors: increased government capex spending, U.S. policy shifts under Donald Trump, and potential FII return. Additionally, the video covers trends in mutual funds, especially multicap funds, and provides insights into upcoming IPOs like Vishal Mega Mart and Emerald Tire Manufacturer, offering valuable information for investors looking to navigate current market conditions.

Takeaways

• 😀 Nifty made its bottom at 23,300 in November, after which the market started recovering despite several bad news.
• 😀 India’s GDP growth in Q2 of 2024 was 5.4%, the lowest in seven quarters, but the stock market absorbed the news and continued recovering.
• 😀 Adani group stocks faced significant declines due to allegations, but the market managed to absorb this negative sentiment as well.
• 😀 Despite 45,000 crore of net selling by FII in November, FII showed signs of buying towards the end of the month, signaling a possible shift in sentiment.
• 😀 Key triggers for a potential market rally include increased government capex, a potential policy shift with Donald Trump's presidency, and a return of FII investments.
• 😀 The Indian government is projected to increase capex spending by 25% in the second half of the fiscal year, potentially boosting the economy and stock market.
• 😀 The expectation of a shift in US trade and fiscal policies under Donald Trump may benefit India, especially in sectors impacted by China’s trade policies.
• 😀 The early signs of FII buying in December suggest that foreign investors might return to Indian stocks, boosting market performance.
• 😀 Multicap mutual funds are becoming increasingly popular due to their balanced risk-reward profile, offering better returns than large caps while managing risk better than mid/small caps.
• 😀 Active multicap mutual funds have outperformed passive ones, with 77% of them beating the index returns in the last month, suggesting that active management can add value.
• 😀 For investors in active multicap mutual funds, the remaining 25% of the fund allocation (beyond the regulatory 25% in large, mid, and small caps) is crucial for generating additional returns (alpha).
• 😀 Vishal Mega Mart's IPO is focused on the retail sector, with significant expansion in Tier 2 cities, and shows strong revenue and profit growth. However, its post-IPO PE ratio is 70, indicating high valuation.
• 😀 Emerald Tire's IPO offers a lower P/E ratio (15) compared to the tire industry average, and has strong profit growth, though IPOs in niche sectors like this tend to carry higher risk.

Q & A

What was the Nifty's performance in the month of November?

In November, Nifty made its bottom at around 23,300, but despite significant concerns, the market did not fall further. It showed resilience and started recovering, eventually trading around 24,700 as of the video recording.

What were the three major bad news events the market absorbed in November?

The three key negative news events were: 1) India's GDP growth slowing to 5.4%, the lowest in seven quarters, 2) Adani Group stocks facing allegations and falling sharply, and 3) Foreign Institutional Investors (FIIs) selling heavily in Indian equities, amounting to a net selling of ₹45,000 crores.

How did the market react to the bad news in November?

Despite these negative events, the Indian stock market absorbed the news without significant panic. Instead of falling, the market began recovering, which is a sign of resilience in the face of adverse factors.

What are the three potential triggers for a short rally in the Indian stock market?

The three potential triggers for a short rally include: 1) Increased government capital expenditure (capex), 2) Positive policy changes under a new U.S. administration (such as trade policies under Donald Trump), and 3) A potential return of FIIs to the Indian stock market.

Why is the Indian government's capex spending important for the stock market?

The government's capex spending is crucial because it could drive growth in various sectors by funding infrastructure projects. If the government increases its spending in the remaining months of the year, it could stimulate business activity and improve market sentiment, possibly triggering a rally.

How might U.S. policy changes under Donald Trump affect the Indian stock market?

Under Donald Trump, India could benefit from reduced trade competition with China. The potential shift in U.S. fiscal and trade policies could make India an attractive investment destination, with some sectors likely to perform better.

What evidence suggests that FIIs might return to the Indian stock market?

In early December, there was evidence of FIIs starting to buy Indian equities, with a net buying of ₹13,700 crores by December 5th. While it’s unclear if this will be sustained, this trend could indicate a shift toward renewed confidence in the Indian market.

What trends are currently happening in the mutual fund market?

Sectoral mutual funds and multicap mutual funds have seen strong inflows. Sectoral funds received ₹46,000 crores in Q1 and ₹49,000 crores in Q2 of 2024, while multicap funds followed closely with ₹10,000 and ₹13,000 crores respectively. Multicap funds are popular because they offer diversification and a balance between risk and reward.

Why are multicap mutual funds becoming more popular?

Multicap mutual funds are gaining popularity because they provide true diversification by investing across large, mid, and small-cap stocks. Additionally, they offer a balanced risk-reward ratio, which appeals to investors looking for stability while still seeking growth.

What is the performance of multicap mutual funds compared to other categories?

Over the last 5 years, multicap mutual funds have delivered a CAGR of 23%, outperforming Nifty50's 15%. While midcap and small-cap funds have provided higher returns (28% and 30% CAGR, respectively), they come with higher volatility. Multicap funds strike a balance between risk and return.

Should investors opt for active or passive multicap funds?

Active multicap funds have outperformed passive ones in recent months, with 77% of active funds beating the index over the past month. The key to generating alpha (additional returns) in active funds lies in how the remaining 25% of assets are allocated, beyond the regulatory requirement to invest in large, mid, and small caps.

What are the key details about the Vishal Mega Mart IPO?

Vishal Mega Mart's IPO, opening on December 11th, is priced between ₹74 to ₹78 per share, with an issue size of ₹8,000 crores (entirely an offer-for-sale). The company has shown strong revenue and profit growth, with a focus on expanding in tier 2 cities, which are expected to grow faster than tier 1 cities.

What financial metrics should investors consider when evaluating the Vishal Mega Mart IPO?

Vishal Mega Mart's financials show a 26% CAGR in revenue and 50% CAGR in profit over the last two years. The company has low concentration risk across product categories and its valuation is slightly above the retail industry's average P/E ratio of 52, with a projected P/E of 70.

What is the key difference between the Vishal Mega Mart and other retail competitors?

Vishal Mega Mart sits between competitors in terms of growth. For instance, its revenue growth in the past year was 177%, compared to 32% for Reliance Retail and 50% for Trent. Its profit growth of 44% is also above competitors like Avenue Supermart, which grew profits by just 7%.

What details should investors know about the Emerald Tire IPO?

Emerald Tire's IPO, priced between ₹90 and ₹95 per share, is a fresh issue of ₹47 crores. The company has grown its profit at 58% CAGR over the past two years, with a focus on exports. Its P/E ratio is 15, significantly lower than the industry average of 30, making it potentially undervalued.

How does the subscription status of the Emerald Tire IPO look?

As of December 6th, the Emerald Tire IPO is over-subscribed by 65 times, with retail investors subscribing 102 times more than the available shares. Qualified Institutional Investors (QIBs) have subscribed 52 times, with additional subscriptions expected towards the end of the IPO.