Nifty’s 13-year stability without 10% decline sparks market anxiety

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The growing unease in the market could be gauged from the fact that Nifty 50 has maintained its upward streak without a 5 per cent fall for over four years and without a 10 per cent decline for the last 13 years.

A significant increase in fiscal expenditure has facilitated India’s robust recovery, according to the latest DSP Mutual Fund’s Netra report, which provides an overview of market anomalies. The report emphasizes the need for the private corporate sector and households to lead in sustaining this growth momentum.

Sahil Kapoor, Head of Products & Market Strategist, DSP Mutual Fund said the calm in the markets, marked by an unnerving lack of volatility, is a double-edged sword.

While it provides a sense of stability, it also masks underlying risks that could surface unexpectedly, catching investors off guard, he said.

He added that to ensure a sustainable recovery, ther private sector and households must  take the lead, transforming fiscal stimulus into lasting economic growth.

The momentum factor, the dominant outperformer since the Covid bottom, has started to lose its edge. The quality factor, which had struggled over the past four years, has begun to see a revival. This shift suggests a potential change in market leadership, which will benefit quality-oriented funds. Quality-oriented active and passive funds could benefit from this changeover.

India’s per capita consumption is slowing down, approaching lows seen in previous cycles. Given that consumption constitutes nearly 60 per cent of GDP and is essential for this sector to grow at a pace exceeding GDP growth to stimulate private capital expenditure.

The gross tax revenue has registered a CAGR of 14 per cent in last 5 years mainly driven by income tax, reflecting a growing dependency on capital gains and stock market performance, which introduces new vulnerabilities, said the report.

The banking and financial services sector emerges as a key driver of market earnings, according to the latest analysis. BFSI companies recorded a 12 per cent increase in net profit growth, significantly outpacing the 4.6 per cent growth observed in non-BFSI Nifty 50 companies. This disparity underscores the sector’s pivotal role in India’s economic narrative and highlights potential investment opportunities, it said.