Are macros turning in favour?

The return of the FII’s on the buy side has turned things upside down. Until now, the FIIs were mostly sellers and DIIs were predominantly buyers. The role reversal between FII’s and DII’s is not an unusual thing. But, what remain to be seen is if DIIs can really sustain their selling in the face of very strong domestic inflows they are receiving. If the redemptions stop, then DIIs can’t afford to hold cash and will also be forced to turn into buyers.

The passage of GST, greater political stability at the centre, swift remonetisation of the economy, weak oil prices and a strengthening rupee have reset the market’s fundamentals significantly. The market is still figuring out how this complex reset of fundamentals will impact earnings. This will be a significant challenge even to seasoned strategists and analysts. Getting an accurate assessment of how earnings will play out in 2017-18 is going to take longer. But, it is fairly certain now that the earnings growth is going to take an upward trajectory.

The coming weeks will see clarity emerge and the markets are likely to gain confidence as the changes merge in every fundamental parameter. Investors who show conviction early will significantly outperform the doubting types.

 

“The market has a mind of its own. It won’t go down because investors want it to.”

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