The prevailing atmosphere in the Indian stock market for a long time was giving sleepless nights to the common investors as well as the big industrialists. The week by week declining market had increased everyone’s concern. However, the market breathed a sigh of relief on Friday, the last day of the trading week. Crude oil prices cooled slightly internationally after US President Donald Trump ruled out an immediate attack on Iran, which had a direct impact on our domestic market.

Sensex and Nifty traded in the green and tried to recover the previous day’s heavy losses. A day earlier, in Thursday’s major decline, Dalal Street investors had Rs. Assets worth more than 10 lakh crores were destroyed. After such huge losses, today’s rally has certainly raised some hope, but investors are still stuck in deep confusion over the market’s future path.

A sigh of relief after nine straight weeks of decline

Friday’s rally aside, the ground reality of the market has been quite worrying. The Indian market has witnessed a downward trend for the 9th consecutive week. Steady rise in crude oil, weakening of the rupee against the dollar, brisk selling by foreign institutional investors (FIIs) and weak financial results of companies put a lot of pressure on the market. People investing money in the market do not understand what to do with this decline and how to protect their capital.

To resolve this dilemma, Mihir Vora, CIO of Trust Mutual Fund, has given his views on the current market situation and its future direction. According to him, today’s boom may bring some relief, but the real challenges are not over yet. Tensions between the US and Iran are still at an all-time high. Internationally, crude oil and US bond yields are still at very high levels. Apart from this, the impact of El Nino on the weather front is also evident on the market sentiment. Due to all these difficulties, buying by foreign investors in the Indian market has been postponed once again.

The domestic economy is strong, but global pressures remain

Mihir Vora says that the real problem in the Indian market is not coming from within the country, but from the rest of the world. Rising bond yields in developed markets around the world and high crude oil prices are breaking the back of our markets. After a period of poor performance, valuations of Indian stocks became very attractive. Market experts were hopeful that foreign investors would start investing money in India after seeing this cheap price.

But rising crude oil and US bond yields dashed these hopes. For this reason, the withdrawal date of FIIs has been postponed. It is a relief that India’s own domestic situation is much better. The financial results of the companies during the June quarter have been good. Despite the uncertainty spreading across the globe, Indian companies have preserved their profit margins. Domestic demand is also doing well. However, the market recovery now seems to be on hold for a few months due to global factors.

These sectors will have more impact

Amid this turmoil in the market, now the eyes of the investors are fixed on the next results of the companies. Regarding the results, Mihir Vora advises that instead of looking at the index as a whole, investors should assess the situation on a sector-by-sector basis. He believes that the coming times may be a bit challenging for some sectors.

In particular, the quarterly results of FMCG, daily use items ie consumer durables and auto companies may remain weak. Along with this, the impact of recession can also be seen on the results of companies involved in paint and commodity business. However, Mihir Vora says investors need not fear or panic over these poor results. Investors should only look at which companies’ products are in demand in the market and how much pricing power they have. Companies that maintain their demand in these tough times will emerge faster.

Banking shares will rise as foreign investors return

According to Vora, whenever foreign investors flock to buy in the Indian market, the fastest run will be the stocks of the big banks. In fact, during the past few weeks, foreign investors have sold the most in banking and IT stocks. Due to this heavy selling, the shares of the big banks are available at very attractive and cheap prices today.

Mihir Vora says there is nothing wrong with the basic health of big banks. Their valuations are very cheap, asset quality is excellent and capital growth remains very strong. Bank shares fell due to selling pressure from foreign investors. Therefore, as foreign investors return to the market, the strongest rise will be seen only in banks’ stocks. However, some precautions are also required in the onward journey. If bond yields rise further in the US, uncertainty in the market may increase further. Some more steps have to be taken to bring back foreign investors. Apart from this, the third quarter results will also be important as these results are expected to build on last year’s huge base.