February Pulse - Sage Views - Ignore the Noise
- Nikhil Gupta
- Feb 11
- 3 min read
Updated: Jul 29
"Down cycles are not fun. But they form the basis for enormous future profitability.” Steve Schwarzman
Dear Investor,
Indian equities corrected for the fourth successive month, down 0.6% mom led by sustained foreign outflows (Rs 874bn). Major drag came from Financials and Healthcare while Energy offered a big boost. DIIs were net buyers (Rs 866bn).
Nifty was down -0.6% in January, pulled by Energy (0.3%), Staples (0.2%), Comm. Services (0.1%); dragged by Financials (-0.5%), Healthcare (-0.3%), Industrials (-0.2%), IT (-0.2%), Utilities (-0.1%). It was flat for Materials, Metals, and Discretionary.
Budget 2025 - A budget for the middle class: In the Union Budget FY25-26, the government has raised the income threshold for tax liability and relaxed the tax slabs for those in the new tax regime (NTR). We believe there will be an increase in spending and saving which will support sectors like consumer durables, autos, asset management, healthcare, travel, jewellery.
We also saw the first rate-cut in 5 years by the newly appointed RBI Governer Sanjay Malhotra. As expected, the RBI commenced the rate easing cycle with a unanimously agreed 25bps cut, as policy trade-offs are turning less challenging with tepid underlying growth, easing inflation concerns, and a perceptible change in the RBI’s INR management stance.
Market Outlook: With the markets largely impacted by tariffs from the US President, weak domestic earnings, FII selling and a Depreciating Rupee, we see Nifty bottoming out at around 22,500 levels.
With Prime Minister Modi scheduled to meet Trump in the coming days, we expect a positive outcome on the tariff front for India while we still think the other factors to take time before markets go into a bull phase.
Market Valuations have moderated a bit although they remain above historical averages with Nifty P/E at 19.9 vs 18.7, Nifty Midcap 150 P/E at 30.6 vs 24.6 and Nifty Smallcap 250 P/E at 22.5 vs 17.1. We believe markets should see its bottom levels in February itself with valuations to undergo further moderation until Q1 2025.
What should investors do?
Market cycles are a part of the investing journey, investors must take opportunity of these cycles. We have seen similar down cycles in 2022, 2020, 2018 and so on however market recovered from every low point. We believe this down cycle is a good opportunity for all investors to add more lumpsum investments to their portfolio and even realign their investments if required.
Investors should also keep realistic expectations as the last 3 years have elevated investor expectations, especially from the mid and small-caps. When markets are in a downturn there is always bad news to scare you from not investing and selling/booking profits. Remember, wealth is created in the long term and patience will be the key. A lot will depend on investor behaviour during these challenging times.
These are the times when most investors will regret not investing, these are the times when investors will feel like exiting their investments. Only those investors who can manage their emotions will have great portfolios in the future. Over the last 10 years, we have seen the major cause between a return of a mutual fund/stock and the return that an investor generated is not great fund or stock selection, it is investor behaviour. Time in a stock/fund and not timing the market will yield better results for your portfolio.
If you are having a tough time managing your portfolio during these volatile times, connect with us to help you navigate through these volatile times.
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Warm Regards,
Nikhil Gupta
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