Market Overview – September 2021


Global Stock Markets

Global equity markets continued to generate positive returns for the quarter as economies opened up and activity levels picked up. Stocks have been on a roll as another mostly successful earnings season has unfolded, but there are reasons for investors to be both optimistic and cautious.

There are several risks that are at the forefront of investors minds, including concerns over the new COVID variant & rising covid cases in Europe, inflation, central bank tapering and sharper than expected slowdown in China. But low interest rates and solid corporate earnings provide a strong foundation of support for equities.

Indian Economy

Economic activity in India is improving gradually as chances of 3rd wave are receding. Indian economy is doing better as compared to Europe and US where 3rd wave has been severe. COVID-19 cases are trending down on the back of successful vaccination programme as vaccine supplies improve.

Additionally, with the late pick-up in rains, cumulative deficiency for the season has come down to 4% of long-period average. Hence, to sum it up, this fiscal is expected to be a year of recovery from the pandemic, as we learn to live with the virus.

Indian Stock Markets

Indian Markets have created history by hitting milestone after milestone! It started with Nifty crossing 16000 on August 3, sprinting to 17000 on August 31 and surpassing 18000 on October 11. September also witnessed the highest mutual fund SIP inflows which crossed the Rs. 10,000 Cr mark for the first time.

The rally was further incentivized by an uptick in certain high frequency economic indicators like GST collection, power consumption, railway freight, e-way bills to name a few.

Going forward, few macro headwinds like high oil prices, supply chain disruptions, high commodity prices leading to strong upsurge in inflation which may result in hardening of interest rates earlier than expected should keep global and local markets volatile.

As far as liquidity is concerned, the selling by FIIs especially since last 2 months (Oct-Nov) has been keeping markets subdued and volatile.

Corporate Performance (Q2 results): Margin pressures evident

Corporate performance in the latest quarter has added to the optimism regarding the health of underlying domestic economy. Corporate earnings have been strong despite economic and business activity yet to fully attain pre-pandemic levels. Besides, they had to content with supply constraints and rising input costs.

At the aggregate level, growth in net sales in July-Sept 2021 is up by 28% from year ago and 22% higher than 2019 whereas the increase in operating profit is 21% over 2020 and 31% over 2019 and operating margins being marginally lower at 22.7% in Q2’22 vs 23.8% in Q2’21.

On the sectoral front, it was a mixed bag with Oil & Gas, Metals, Capital Goods, PSU Banks, NBFC, Textiles, Healthcare and Retail earnings beating estimates while IT, Consumer Staples and Durables, Cement, Autos, Chemicals and Private Banks reported earnings below estimates.


Buy when the sale is on. Though Index (Sensex/Nifty) has corrected ~7-8% from the recent highs, many stocks have corrected significantly (refer below data).

Out of 1168 companies having market cap above 250 Cr (our investment basket mostly)

% of companies >250 Cr Market CapCorrection in market price

i.e. almost every second companies is down by more than 20% from its recent high.

The main reason for the steep correction in Indian market is ‘valuation’ as market was running ahead of fundamentals; as can be seen from the fact that global markets have behaved differently and were trading at near life highs only until recently with some correction being witnessed in the last couple of days on the back of concerns regarding new covid variant as well as lockdown like situation being imposed across number of countries.

So, has anything dramatically changed in our economy? We don’t think so as lot of things seem to be improving with commodity costs cooling off from highs, freight issues getting resolved, corporate Balancesheet has improved significantly, low COVID cases compared to other countries and bullish commentary by management across most industries.

Based on the above and our timely call to keep min. 10% cash across clients, we have deployed some cash already and are continuously looking at buy opportunities to make use of the current ongoing correction especially in our investment basket of Small and Mid-Cap.

We would like to end the update with the following quote:

“Stock market corrections, although painful at the time, are actually a very healthy part of the whole mechanism, because there are always speculative excesses that develop, particularly during the long bull market”

Ron Chernow

Happy Investing!!