HDFC Mutual Fund Update: The Indian stock market has been witnessing a steady rise since 2021. Nifty 500 has given a return of 21 per cent annually in the last three years. This rise has been broad based, that is, there has been a rise in stocks of all sectors. But the biggest rise has been seen in mid-cap and small-cap stocks. But in the coming days, the large-cap segment is bringing a big opportunity for investors. HDFC Mutual Fund has explained in its report why investors should now invest in the large cap segment.
Where are the investment opportunities in the markets
The credit for this boom in the stock market goes to India’s excellent economic growth rate, better than expected corporate earnings, central banks injecting cash into the system and a huge surge in investment by domestic investors. But the question arises that after the spectacular boom in the stock market in the last three years, where are the investment opportunities for investors. The market cap of BSE 100 is at a 10-year low compared to the market cap of BSE 500. On July 31, 2024, this ratio was at 64 percent while the 10-year average has been 72 percent, which shows that large-cap stocks have underperformed the broader market. Large-cap stocks have seen less growth than mid-cap and small-cap.
FII flow will come in large cap!
In the last three years, domestic institutional investors have invested close to $80 billion in the Indian stock market. In comparison, foreign institutional investors have invested only $5 billion. The Lok Sabha elections are now over and India’s economic growth will accelerate in the coming days, considering this, a big jump in the flow of foreign investment can be seen in the coming days. 80 percent of FII investment is in large-cap stocks and if FII investment increases in the coming days, the large-cap category can benefit greatly. The dollar will weaken due to the reduction in interest rates. Also, if the rupee remains stable or strengthens, FII investment in the Indian stock market will increase.
Why did the market boom?
HDFC Mutual Fund said in its report that the main reason for the boom in the Indian stock market is the excellent earning growth and flexible balance sheet of Corporate India. The debt of companies has come down. Also, cash has also contributed significantly to the boom. During Covid, central banks put cash in the system. Due to more cash, interest rates have come down, which benefited the companies. Due to strong GDP growth, the confidence of domestic investors increased and the number of investors also increased. In 2020, where there were only 4 crore demat accounts, their number has increased to more than 15 crore. The flow of EPFO NPS also contributed to the boom in the market.
