Euphoria of mid and small caps will consolidate going ahead, says market expert
Mid & Smallcaps are underperforming… 21,983 22,494 2.3% 20,090 20,435 1.7% 17,831 17,996 0.9% 14,965 14,803 -1.1% It is prominent to acknowledge that a good amount of the mid & small caps rally in FY24 was triggered by high inflows from retail investors. Led by both, inflows through MFs and direct investment. SIP inflows were ₹18,800cr for January 2024, up 36% YoY.
From a 4 cr. demat in March 2020, we have come to 14 cr in 2024. On a YoY basis, the demat account has increased by 30% from 11cr in Jan 2023 to 14.4cr in Jan 2024.
This month’s volatility does emerge being a heavy economic data release in India and globally. Despite these challenges, the main indices have managed to perform well, largely driven by strong India GDP figures of 8.1% YoY for Q3. Moreover, the RBI's initiative to increase liquidity in the banking system, transitioning from deficit to surplus, has instilled confidence in the banking sector and prevented any significant downturn in the broader market.
Global markets have been flattish in the last one month, with a negative bias, speculating the future course of Fed action on rate cuts. It's widely anticipated that the Fed chair might downplay the necessity for immediate rate hikes, favouring a gradual approach later in the year, contrary to the market's more rapid expectations. However, the cut trajectory is likely to be accommodative in the second half based on recent FOMC minutes, suggesting the policy rate may have peaked and higher rates could hinder growth.
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