10-year data suggest bears dominated the Street in November; what to expect in 2020?

The Indian market might have rallied by over 2 percent so far in November, but historical data suggest bears have mostly controlled the D-Street.

The Nifty50 is back above 11,900 levels but experts feel that investors should stay cautious amid US election results as well as a rise in COVID cases across the globe.

The Nifty50 rallied more than 3 percent in October and the momentum looks strong at least in the first week of November, but as we approach crucial resistance levels above 12000 some more consolidation is expected before the index breakout into unchartered territory.

Looking at the historical data, Nifty has given positive returns in October in four of the last 10 years. The index rose over 6 percent in November 2018, followed by 2014 when it gained 5.13 percent, and in 2012, Nifty50 closed with gains of 5.04 percent in November, data from AceEquity showed.

The index closed in the red in 6 out of the last 10 years. The index fell nearly 10 percent in November 2011, 4.6 percent in 2016, and a 2.5 percent fall was seen in 2010 for the month of November.

“We believe that the outlook for November is a mixed bag and a lot will depend on the outcome of the US elections. A favorable outcome of the US elections results will result in a risk-on environment which will lead to strong FPI flows for India,” Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd told Moneycontrol.

“An adverse outcome of the US elections on the other hand will result in a global risk-off environment which will lead to FIIs pulling out money from India and put pressure on the markets,” he said.

Roy further added that there is also the probability of the results being challenged in the US Supreme Court which could lead to volatility in the markets.

Experts are of the view that with economic activity picking up, and September earnings meeting expectations, experts feel that the rally could continue in select stocks but index could face marginal selling pressure at higher levels.

“Most of the companies performed very well in the September quarter and are expected to perform better as economic activities open up,” Atish Matlawala, Sr Analyst, SSJ Finance & Securities told Moneycontrol.

“However, valuations at current levels look a little stretched and we believe markets need to consolidate before making a fresh up move,” he said.

Events that will impact stock markets in November include the outcome of the US Presidential elections, the outcome of the FOMC meeting, the second wave of lockdown, macro and microeconomic data.

Institutional Flows:

Institutional activity picked up in November. Anecdotal evidence suggests that foreign institutional investors (FIIs) were net buyers in Indian markets in six of the last 10 years.

FIIs poured in over Rs 22,000 crore in November 2019, followed by Rs 19,000 crore in 2017, and over Rs 18,000 crore in 2010.

FPI flows will be a function of the outcome of the US elections along with progress on the second stimulus package and news flow on the Covid and vaccine front, suggest experts.

“Any positive development on the US stimulus package and the vaccine front can trigger a risk on environment globally which will lead to strong FPI flows,” says Roy of Angel Broking Ltd.

“However, any adverse outcome of the US elections which leads to a delay in the second US stimulus package or negative news flow on the vaccine front can trigger a risk-off environment which will result in FPIs pulling money out of Indian equities,” he said.