2024 promises to be a non-linear market. Here are 3 key reasons why
When facts change, I change my mind. What do you do sir? – Lord Maynard Keynes.
But what do you do when information swings like a pendulum that has lost control? Sector and stock rotation is happening at a bizarre pace. For some time, institutional investors tried to ignore hyper-rotational activity as just an irrational retail frenzy that would die down; but they seemed to have thrown in the towel and jumped in. Daily institutional turnover has doubled from INR 25,000-30,000 cr to INR 55,000-60,000 cr since Nov 2023.
Keynes would scoff at being quoted while justifying buying power stocks following a hot summer forecast – but that is the nature of the market today.
Look beneath the surface and one can see nervousness. This is driven by 2 reasons. One is fear of missing out and underperforming in a hyper-competitive investment management market. Second, lack of conviction in your process and framework. Such violent mood swings typically indicate nervousness and precede a sell-off. Or at the very least, a volatile phase in the market – I prefer to call it ‘non-linear’ markets – with frequent swings between agony and ecstasy. A few such phases were 2007-08, 2017-18 and now. In each of these periods, investors chased, and churned, brokers made money, and Keynes's quote was oft repeated.
2024 promises to be a non-linear market. There are 3 key reasons for this volatility. Earnings risk, high earnings dispersion and violent mood swings on interest rate outlook.
Earnings Risk: In the last 3 quarters, Nifty sales
