Please find below the 5 charts that tell interesting stories on Markets and Investing.

 

1) 2024 Lok Sabha Elections - Scenarios and Market Impact:

 

The Great Indian Election of 2024 is creating anxiety among investors. Expected scenarios are as under:

 

• As long as the BJP wins a majority of seats in the Lok Sabha again (>272 seats), we think markets will react positively. This event has highest probability. 

 

• If BJP wins between 230 to 272 seats and forms the Govt with support of allies, then knee jerk reaction in markets may happen but rebound will happen soon. 

 

• Non-NDA coalition Govt may lead to Equity sell off for short term. The probability of this event is very less. 

 

 

2) Global Equity Market Valuation:

 

1) Nasdaq is the most expensive Index globally with 1 Year Forward PE Ratio of 26.6. This rally has been driven by top 7 Tech stocks which are beneficiaries of Artificial Intelligence (AI).

 

2) Indian Large Cap is reasonably valued with 1 Year Forward PE Ratio of 20.3.

 

3) Equities of all other countries in the World are cheap. Europe and Emerging Markets have very attractive valuation.

 

4) Majority of the World is yet to see equity rally. And this big rally is expected to happen when US Fed cuts the interest rate later this year in 2024. 

 

 

3) Is Indian Equity Market in Bubble?

 

Indian Equity has delivered phenomenal return in the last 18 months and investors are now worried about high valuation. 

 

Based on 1 Year Forward PE Ratio, Large cap is overvalued by about 6%.

 

Mid Caps are overvalued by 29% and Small Caps are overvalued by 38%. 

 

 

4)  Mid Cap and Small Cap Categories have gone through a Sea Change:

 

1) The average Market Cap of a Mid Cap company is currently at Rs. 45,455 Crores. In 2013, the average was at Rs. 5,989 Crores and in 2003 the average was Rs. 843 Crores.

 

2) The average Market Cap of a Small Cap company is currently at Rs. 2,480 Crores. In 2013, the average was at Rs. 255 Crores and in 2003 the average was Rs. 27 Crores. 

 

3) Today's average mid cap company is similar to the average size of a large cap company in 2011. 

 

 

5) India's Silent Personal Savings Crisis:

 

Household financial assets as a % of GDP has fallen from 12% in 2019 to 11% in 2023. 

 

During the same period, Financial Liabilities % has gone up from 4.1% to 5.9%. 

 

Accordingly, the net financial assets % has fallen from 7.9% to 5.1% in 4 years. 

 

Households in India are generally saving less partly due to weaker incomes and partly due to greater tendency to consume. 

 

From short term perspective, Large Caps are looking good. But for investors with a time horizon of 5-10 years, even Mid Caps and Small Caps are fine.

 

 

Read more similar articles in our blog - https://alphacapital.in/blog/

 

 

Best Regards

 

 

Dr. Mukesh Jindal CFA, CFP, CAIA, Ph.D.

Alpha Research

 

 

Disclaimer

The above views are our expectations of the economy, market and investments. The views may or may not play out accordingly. You are requested to do your own due diligence before making any investment.