Fund managers are regularly being asked nowadays: how do markets look at this point of time as they are not cheap on a trading valuation basis? Most of them feel that it remains attractive from a business cycle perspective where many corporates have deleveraged by reducing debt in a significant manner and credit growth is low plus profit to GDP is also not high. Therefore , once the pandemic blows over and business cycles recover, then corporate earnings and profitability will also show sharp improvement during the course of the year. Markets were on tenterhooks around the world last Wednesday waiting for the outcome of the US Federal Reserve open market meeting. Taking note of the higher inflation due to transitory factors, the US Federal Reserve Governor Mr Powell indicated increase in interest rates only towards the end of 2023. The NSE Nifty is the most traded index in the country while the BSE Sensex is the most popular among investors to gauge the sentiment or mood prevailing in the markets. The National Stock Exchange Nifty index does a periodic review from time to time to include or exclude certain stocks from its main index, the Nifty 50 index. For the current year the announcement should be by end of August 2021 and the rebalancing date could be around 29 September 2021. Brokerage houses are expecting Avenue Supermarts Ltd stock which is popularly known by its brand name D’Mart and owned by legendary investor Ramesh Damani to get included in the Nifty 50 index. The company does meet most of the criteria inclusive of methodology and other factors laid down by the NSE Maintainence committee, except that it is currently not part of the important derivative segment. But if there is an announcement in August this year by the National Stock Exchange to include the Avenue Supermarts stock in the index, then there is high probability of it being included by September 2021. The stock currently quoting at Rs 3300 on the Indian stock exchanges can be bought by investors for a 12% gain in 6 months time frame on the back of better quarter financial results and huge trading participation by traders and foreign investors alike.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.