After overtaking the Hong Kong markets in terms of value, India has now surpassed the trading volumes of the Hong Kong Exchange (HKE). The one-month average daily turnover (ADTV) for the domestic markets (NSE and BSE combined) is $16.5 billion (about Rs 1.4 trillion), higher than $13.1 billion for the HKE. Last month, India had overtaken Hong Kong as the fourth largest equity market globally in terms of market value.
“We think in some ways this reflects the prevailing consensus narrative toward India and HK/China stocks. Speaking to investors, we sense there is almost a consensus structurally positive view on India stocks (although valuations are widely cited as a stumbling block). However, in contrast, we sense that investors’ appetite for HK/China stocks remains quite low. In some ways, the recent exponential rise in trading values in India is also a concern, from a contrarian perspective,” said Chetan Seth, Equity Strategist, Nomura in a note.
Nomura believes that the domestic markets could see hiccups in the short term but investors can buy into the dip.
“We do not rule out an “air pocket” for India stocks…Nonetheless, we would capitalise on any pullback in India and use it as an opportunity, as we remain structurally positive and in the ‘buy the dip’ camp,” Seth added.
The likely headwinds identified by Nomura are a cyclical slowdown in the economy from a high base, leading to some earnings downgrades; rising concerns of tighter banking sector liquidity; likely profit taking/trimming heading into the General elections and stretched investor positioning and valuations. Among global factors, likely reallocation of flows back to other large Asia (ex-Japan) markets like Korea and China is seen as a factor weighing on the domestic market performance.
In January, India witnessed record opening of new trading accounts as well as trading volumes. The broking industry added 4.7 million new accounts, surpassing the previous record of 4.1 million in the preceding month. Similarly, the ADTV for both the cash and derivatives segment (NSE and BSE combined) hit a record of Rs 1.23 trillion and Rs 460 trillion (on notional basis).
“There is considerable momentum in the market on the back of the rally that happened pre-budget and hopes of regime continuity. The volumes will continue to remain robust. More importantly, mid- and small-caps are rallying, which is reflected in the cash volumes. Unless there is some big correction, there is no reason for cash columns to taper,” said Ajay Menon, chief executive officer (CEO) for broking and distribution of Motilal Oswal Financial Services.
The Nifty Midcap 100 and the Nifty Smallcap 100 have gained 60 per cent and 74 per cent in the past one year, respectively. By comparison, the benchmark Nifty 50 index is up 23 per cent.
First Published: Feb 09 2024 | 10:04 AM IST
