The benchmark indices ended Saturday’s trading day flat, despite several encouraging news in the Budget. Except for FMCG, real estate, and consumer-driven industries, which are anticipated to gain from tax cuts, most other industries witnessed no change. There was a little decrease in shares of the energy, oil and gas, and infrastructure sectors.
The majority of market analysts are not concerned about weak business profits. Foreign portfolio investors (FPIs) have become cautious as a result of the first nine months’ profit growth lingering in the single digits. Furthermore, since Donald Trump became president, a large number of FPIs with headquarters in the US are shifting their investments from emerging nations.
In addition to Q3 results, which will determine the short-term market direction, FII action will be actively monitored. Furthermore, the VIX’s (volatility index) cooling down suggests little likelihood of a decline.
Foreign portfolio investors (FPIs) have sold $20.2 billion (₹1.73 lakh crore) worth of stocks since October. The benchmark indices have dropped about 9% after reaching all-time highs in late September, while the broader indices have dropped 13%. Nonetheless, throughout this time, domestic institutional investors (DIIs) bought shares valued at ₹2.73 lakh crore, giving the market vital support.
The market is now more affordable, especially for large-cap stocks. Following their recent high in Q3FY25, the Nifty50, Nifty Midcap 100, and Nifty Smallcap 100 indices have experienced corrections of 12%, 14%, and 16%, respectively. With Nifty50 large-cap valuations falling below +1 standard deviation, valuations are now comparatively less costly.
The bond yield premium over earnings yield, interestingly, indicates that the market is less expensive than the Nifty50 P/E (price/earnings) multiple suggests. But even though mid-cap and small-cap companies are likely to have higher earnings growth than large-cap companies, their values still seem high.
