Market Decaying in Valuation : Reasons for the Fall and Further Predictions


Indian Markets have been under a solid bull grip since the announcement of Budget 2022. The no show budget got the market an indication of the end of the bear rally as well as all the red flags. However the market has not been gaining as much as it should. Looking at the rally presented by Indexes post Budget 2022 it seemed as if the markets are going to cross the 18000 Mark again. However Nifty faced a strong resistance at 17800 Levels. Similarly bank Nifty was unable to cross 40000 Mark again, These signs do not signal the end of the  market rally. However they are surely a way to describe that the markets are not in a position to gain robust returns given the amount of volatility and volume.

The major reason that seems to obstruct the market run is FII selling again. The FII are trying to dissolve index valuations and get an opportunity to buy at a discounted price. However the DII have been making sure that this does not happen. Also people are pulling out their money as soon as they start getting hints about LIC IPO to get launched soon. The LTCG tax bracket was a motivation for the people with heavy profits. This also made sure that long term positions would be a preferable option given the capped limit now on. Hence the volume can seem to decrease over a period of time.

Indian VIX and Nifty50

Indian volatility index has been constantly in the radar since the budget 2022 announcements. The reason is the highly volatile shift for Nifty50 and Bank Nifty. In the previous two sessions the Nifty50 has been constantly achieving the milestone for 150 point gai and then deviating to end in red zone. This has been the effect since the last 2 days. However interesting it sounds for the scalp traders but it is making the market again no directional. Post budget 2022 announcements it was pretty sure that everyone can now safely invest for long term gains without any fear of downfall. The reason was Indian policy clearly focused on providing reforms that could aid the growth for the future. 

This signaled investment into blue chips for multibagger returns and also starting to look after the potential boosters. Since the last 2 days Nifty50 has lost gains of 400 points approximately. This has been possible due to selling pressure in the automobile and oil segment. The oil sector is under some pressure given the rising prices of Crude oil. Along With this the government focussed on providing constant support to E.V. industries and hence the oil business is bound to get decreased over a period of time. The introduction of renewable energy is the reason for the same. Hence the direct hit is seen on Reliance for the same reasons.

Market Direction 

The market direction cannot be determined for the short term right now. It is quite interesting to notice that the markets are not at all breaking their support levels but on the other hand they are also not moving past their resistance levels. This only signs the gathering of volume for an outburst in either direction. The similar pattern has been noticed multiple times in the last 3 months.

One cannot be sure about the short term movement of markets however the long term prediction has been laid by multiple brokerage firms. The target for Sensex is 100000 points by the end of this year or 2023 Mid year. The Brokerages are constantly signaling bullish trends for long term Indian markets. This means that though the markets are shaping into unidirectional formats, every dip is a signal of buying and accumulating more shares and getting best averages possible.

Portfolio Formation in Such Times

The Indian Budget signaled multiple segments to be wicked up before it’s too late. The portfolio formation in such times should definitely be biased on two sectors :- Infrastructure and Electric Vehicles along with Renewable energy. This means companies such as L&T, Shree Cement, Ultratech Cement etc should be on the top lists of any investor. Along With this FIEM Industries, Tata Elxsi, Tata Motors, Mahindra CIE, Sona Comstar etc. prefer strong business for Electric Vehicle development.

The reason why more investment is needed for diversion is the future of India and its allied segments. The future of India is clearly based on digital marketing and Electric vehicles. This means the Technology stocks are a major pickup for Indian Investors. 

While remembering the Technology segment one has to definitely keep in mind the buy back brought in by TCS. Tata Consultancy Services is trying to get its shares back from market at a price of 4500 Rs. The current valuation of the share is 3800 Rs. This means the company sees high potential for the share to be valued at 4500 Rs. Hence opportunities in TCS are wide as of now. With more buying in TCS the technology segment is going to get a boost. This can provide significant gain in Nifty50 as the technology sector has high effects on it. 

Hence short term direction cannot be guessed right now. However, long term targets for the Indian Economy and Markets are highly bullish.

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