Japan’s world-beating stock gains may lose steam

In a financial year where the number of stocks gained is much larger than stocks that end in red, there are some surprises in the list of stocks that have ended FY 24 in red. Surprise because of two reasons. First, these are all largecap stocks where fundamentals are surely not in doubt. They have consistently seen earnings inching upward. Yes, one can have a debate about the rate of growth at which earnings have been less than satisfactory. But then they have grown, except in 3 cases, where one can argue that earnings are just refusing to move up. The second surprise is that some of them have created great wealth over the long term. So, if they have not been able to gain in one year should one ignore them. The list is filled with major surprises, a company that is amongst the top ten stocks in terms of market capitalization in the Indian stock market. History has shown that in the stock market, if the fundamentals of a company are fine, then sooner or later they make a comeback.

Financial markets are bracing for what could be a momentous week, with a Federal Reserve meeting, U.S. employment data and earnings from technology heavyweight Apple Inc (AAPL.O) possibly setting the course for stocks and bonds the rest of the year.

Stocks such as Rama Steel Tubes, Filatex Fashions, Indianivesh, Magnum Ventures, Euro Asia Exports, Madhusudan Securities, Imagicaaworld Entertainment, Abhirami Financial Services, Tirupati Tyres, Soma Textiles, and Deep Diamond India have gained over 100-700% from the March 2022 levels.

Vijay Kedia, multibagger hunter and top value investor, believes that the market is in a confusing state and that the only thing to look out for is the bottom. He is cautious about investing in new-age stocks, as their valuations are still high despite the current market conditions. He is more interested in investing in stocks that are already profitable and have a good track record.

“A sectoral rotation is going on. Pharma and realty are seeing much more delta which has been lagging in the consumer space. I still think the wedding season and the impetus going forward will see these stocks regain their momentum but like I said, earnings may have priced in the best for some time.”

The country’s continuous rupee recovery and the government’s successful negotiation with the International Monetary Fund are said to be two major factors for the hike.

Indian markets closed in red as IT earnings for Q1 FY24 and major macroeconomic data awaited. IT, banking, and consumer durables stocks dropped. Midcap and small-cap stocks outperformed.

Indian markets are likely to continue their rally thanks to benign liquidity, stronger-than-expected results so far in the current quarter, and diminishing pressures on pricing. Underperforming sectors such as pharmaceuticals as well as capital goods, consumer durables and defence companies offer good opportunities. Stocks of safe bets, like ITC, Britannia and HUL, are doing well due to favourable valuations and strengthening ownership in a scenario of intense uncertainty before the election.

Analysts are cautiously optimistic as second-quarter reporting season rolls out amid this year's rally in U.S. stocks fueled by optimism over artificial intelligence (AI) and a resilient U.S. economy.

Indian equity markets started positively, but weak sentiments persist after the central bank's decision to maintain the key rates unchanged, as a caution towards inflation, while positive macro news buoyed the market. 75 smallcap stocks delivered double-digit gains with the top gainers being Greenlam Industries, EKI Energy Services, Suzlon Energy, and Indian Hume Pipe Company. Midcap segments, only Torrent Power, Hindustan Aeronautics, and Ajanta Pharma traded in the double digits. L&T was the top performer in the Sensex market. The release of May's domestic inflation data and the outcomes of the FOMC meeting is expected to play a role in shaping the market trend.