November could favour bulls, but macro headwinds cloud outlook

Mumbai: Investors heading into November will have to weigh a historically favourable month for equities against a challenging backdrop of elevated crude oil prices, rising global bond yields and a weak rupee. November has traditionally been a strong month for Indian stocks, with the Sensex ending higher in seven of the past 10 years and the Nifty 50 gaining in six. Broader markets have also shown favourable seasonality. The BSE Midcap 150 index closed higher in eight of the past 10 Novembers, while the BSE SmallCap 250 ended with gains in six of those years.

Kranthi Bathini, equity strategist at WealthMills Securities, said the extension of festive activity into November, encouraging corporate earnings and renewed foreign buying, could be tailwinds for equities.

“With festive activity extending into November, encouraging corporate earnings, including recent results from Reliance Industries and Jio Platforms, and FPI buying over the past two weeks, equities could find support,” Bathini said.

This year, the extension of festive activity into November, improving corporate earnings and the return of foreign investors could support market sentiment. However, global uncertainties and elevated oil prices remain key risks.

In October, the Sensex and Nifty gained 1.9% and 2.7%, respectively, while the BSE Midcap 150 and BSE SmallCap 250 declined 4% and 6.3%, respectively.

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Foreign portfolio investors (FPIs) have turned net buyers over the past two weeks, purchasing nearly $2 billion worth of Indian equities. Experts said global investors had been chasing the AI and semiconductor trade in markets such as the US, Taiwan and South Korea, as part of a rotation towards growth opportunities and relatively cheaper valuations.However, crude oil remains a key risk. Concerns over a possible resumption of US military strikes on Iran have kept oil prices elevated, with crude trading near $115 per barrel. Any credible de-escalation in West Asia could trigger a relief rally and provide further support to equities in November, experts said.

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Aditya Agarwala, co-founder and CIO of InvestValue Capital, said investors should favour companies with strong domestic earnings visibility and pricing power, including private financials, select consumption stocks, capital goods and industrial companies with good order books.