Index of the week

Chart of the week

View on Equities and Debt post the Iran/ Israel conflict

Israel being bombed by Iran and its repercussions into a potential global conflict is a big cause for worry risking the amazing equity run we have been seeing. Our analysis on where we stand, the potential impact and any actionable

Valuations

• The Nifty is trading at around 23x trailing earnings and approx. 20-21x forward earnings - This is in line with the median valuations it has traded at historically

• Domestic demand of equities continue to soar with the SIP book closing on 20k crore monthly negating foreign outflows to a large extent

• Equities are at about 5% (this should be higher in the latest numbers, yet to be released) of Indian household savings – We remain confident that this no. is set to increase to double digits sometime in this decade on the back of better awareness, social media, stable government, past returns, strong economic prospects and lack of other alternates

World War 3 – How likely?

• We wouldn’t hazard a guess here especially in the medium term but the current conflict as of now in our opinion could peter down in the coming week

• Oil prices, Israeli stock markets and the Dow futures are not significantly down. In most cases if the conflict is expected to widen the losses would have been much deeper

• Most countries including the major Arab nations have largely come in support of de-escalating tensions which is again a positive sign

• Our belief is that as of now the Iranian attack is more optical

Actionables and how we foresee markets

• Nifty could continue to move higher until the election outcome and maybe touch 24k as well

• Despite high valuations, small and mid cap momentum could continue (though we remain cautious in some of these pockets)

• We have been maintaining that we don’t believe in substantially lower interest rates as the government would continue to be wary of a heated economy

• Investors should continue to hold positions and look at rebalancing very frequently i.e. If the equity allocation increases beyond their asset allocation limit, they should reduce and vice versa . Broadly we believe investors could start active buying below 22k levels and look at building cash positions beyond 23.5k levels

• The longer term opportunity considering the tailwinds remain strong

• In the eventuality that the conflict widens, the buying opportunity could move from 21,500 levels to around 20k Nifty levels which we see as a fair bottom for now

• Gold should be at least 5% of one’s portfolio but not exceeding 10% at the max

Interesting & Insightful news

• Is this Silver’s moment? - Read More

• The Phalori Satta bazaar - Read More

• 10 ways in which Iran could attack Israel (The drone one has been correct as of now) - Read More

• Household debt hit record highs - Read More

• Holding on to losers (Warren Buffet) - Read More

• Is the Ukraine war getting dangerous - Read More

• Narendra Modi and the unstoppable rise of India - Read More