Return of the Good Times
D-Street is all set to light up before Diwali with the Nifty surpassing its previous swing high of 12,025 after almost 15 trading sessions. The Nifty has almost gained 5 per cent from the October 30 low and, if you recall, we had shared a theory about why it’s prudent to keep your bullish cap on despite the biggest event of the world – the US’ presidential election – being underway. Yes, we witnessed bouts of volatility during the week amid the initial picture that showed neck-to-neck fight between Donald Trump and challenger Joe Biden. At the time of writing, though we don’t have a clear winner on hand, the lead that Biden has gained so far would make us believe that he will take charge of the White House.
As such, market participants are now looking forward to the corona virus-related relief package in the US with Senator Mitch McConnell providing a clear boost to risk appetite by commenting that the package would be approved by the end of the year. On the domestic front, glad tidings for market participants have come in form of the service sector activities expanding in October for the first time since February. And, the country’s largest lender by asset, State Bank of India reported a 52 per cent jump in Q2FY21 on the back of a steady rise in net interest income and a fall in bad loan provisions.
Further, the recently released automobile sales number are not less than a fairy tale story given that we are not yet out of the woods from the impact of the virus. The country’s largest carmaker, Maruti Suzuki, reported growth of nearly 19 per cent YoY in total sales and Hyundai recorded its highest-ever domestic sales in October 2020. As per a report by Autopunditz, passenger car sales saw an exciting growth of 17.5 per cent in October 2020 compared with those in the same month last year. With an impressive upsurge in the month of October, the Indian passenger vehicle industry logged double-digit growth for the third successive month.
Traditional buying around festival time coupled with inclination towards personal mobility are some of the reasons attributed to upswing in passenger car sales. Meanwhile, consumer durables’ sales are also showing promising signs with advertisement budgets progressively reverting to normal levels. Furthermore, factories are reported to be operating at full capacity and this is reason enough to feel cheerful. But, doesn’t this look like a fairytale? Well, the answer to this question lies in Credit Suisse’s global wealth report.
As per the report, the wealth per adult reported a growth of 0.70 per cent to USD 17,420 at the end of June 2020 as compared to USD 17,300 at the end of 2019. Thus, despite the pandemic the wealth per adult was not much affected though it was initially believed that it would take a big hit. In fact, it saw a moderate jump and with the super deals on offer and falling interest rates, the trajectory has turned towards a revival in demand. As is said, any robust rally in the market is incomplete without the contribution of the banking space.
As of now, banking stocks have been at the forefront in the current rally, having recorded double-digit gains from the low of October. And if we look at the internal performance of Bank Nifty, all the constituents’ of the index have delivered a positive return from the close of October 30 to the close of November 5. Given this scenario, stay in the market with a bullish bias as long as the index stays above the zone of 11,750-11,800. We, in fact, may be celebrating new highs in the indices in the coming months if there is no other catastrophic event upsetting the apple cart. The role of the Bank Nifty would be pivotal and the key would be the performance of the blue chip Reliance Industries since it occupies a heavyweight position in the index.
