The stock market opened on a subdued note on Tuesday, reflecting weak global sentiment and carrying forward the impact of Monday’s drop.
The benchmark indices saw a marginal rise at the opening, with the Sensex gaining 183.87 points to start at 81,335.14, while the Nifty inched up by 31.55 points to open at 24,812.65.
In the early trading hours, the Nifty index displayed a mixed trend, with 22 companies advancing while 27 declined. Shriram Finance, Tech Mahindra, ICICI Bank, HCL Technologies, and Nestle India led the gainers, while Tata Steel, Bharat Electronics Limited (BEL), Mahindra & Mahindra (M&M), Tata Motors, and Bharat Petroleum Corporation Limited (BPCL) were among the top losers, reflecting a cautious stance among investors.
Ajay Bagga, a banking and market expert, said that while the S&P 500 saw an annualized growth rate of 13 per cent over the last decade, the profitability of major global asset managers such as BlackRock, State Street, JPMorgan, and Goldman Sachs has declined. Their profits in 2023 dropped to 8.2 basis points of assets under management, down from 10.1 basis points in 2021.
“The Indian market remains a stronghold for active management, despite an increasing trend towards passive fund launches. He highlighted that even with high fees for passive funds compared to global competitors, Indian investors have continued to buy equity products through mutual funds and insurance companies consistently,” Bagga added.
Bagga also highlighted the dynamics of foreign and domestic investment flows. In 2022, while Foreign Institutional Investors (FIIs) withdrew Rs 2.6 lakh crore from Indian markets, Domestic Institutional Investors (DIIs) countered this by purchasing nearly the same amount, Rs 2.59 lakh crore. This pattern persisted in 2023, with FIIs selling Rs 1.49 lakh crore and DIIs increasing their purchases to Rs 5.41 lakh crore.
Up to October 18 in 2024, FIIs have sold Rs 1.87 lakh crore, while DIIs have purchased Rs 4.2 lakh crore. Bagga observed a 5% reduction in DII flows compared to 2023, attributing the slowdown to rising taxes on domestic investors, which he warned could soon reach a tipping point.
Bagga also drew attention to the sluggish private consumption growth in India, particularly in rural areas where consumption has risen by just 5.4% year-to-date (YTD). Urban consumption grew at an even slower rate of 4.5% YTD. Given that private consumption accounts for around 60% of India’s GDP, these figures suggest potential weaknesses in the economy, corporate earnings, and the stock market.
The expert further emphasized that elevated stock market valuations, coupled with high growth expectations, could lead to investor disappointment as corporate earnings growth slows. He advised investors to exercise caution when allocating funds, given the backdrop of a slowing macroeconomic environment, weak earnings growth, and high valuations.
The market’s flat opening on Tuesday reflects these ongoing concerns over global sentiment, sluggish consumption, and persistent FII outflows. “With elevated valuations built on very high growth expectations, there’s little room for justifiable price appreciation. Investors need to be cautious in such an environment,” Bagga added. (ANI)