Market Notes - 12th February

Indian stock markets **closed with minor losses** on February 12, 2025, marking the sixth consecutive day of decline. The BSE Sensex ended at 76,171.08, down 122.52 points or 0.16%, while the NSE Nifty 50 closed at 23,045.25, lower by 26.55 points or 0.12%. https://preview.redd.it/pw2mlapg9pie1.png?width=1455&format=png&auto=webp&s=36b0c7d0a5c46c85c02b1da5a124a6e5127cff7e **Sectoral performance was mixed**, with realty, oil & gas, and auto sectors facing selling pressure, while PSU bank, metal, and financial services stocks showed some strength. The Nifty Realty index was particularly weak, dropping 2.74%. The broader market underperformed the benchmark indices, with the BSE MidCap and SmallCap indices falling 0.45% and 0.49% respectively. https://preview.redd.it/6lhdwjoh9pie1.png?width=1456&format=png&auto=webp&s=26a201c478abeaf074e4b5c0b30022abf26820a2 **Market breadth was negative**, with 1,537 shares rising and 2,432 shares falling on the BSE, while 721 stocks hit their 52-week lows during the session. Despite the overall negative sentiment, some stocks like Tata Steel, Shriram Finance, and Bajaj Finserv were among the top gainers. # Factors Influencing the Markets: * **Global Economic Concerns:** Geopolitical tensions and trade wars, particularly US President Donald Trump's tariffs on steel and aluminum, have increased market uncertainty. The recent announcement of tariffs on goods imported from China, Mexico, and Canada has further weighed on investor sentiment. * **Domestic Market Factors:** Weak corporate earnings have failed to meet market expectations, leading to selling pressure across sectors. The rupee's weakness against the dollar has made Indian stocks less attractive to foreign investors. * **FIIs Selling:** FIIs have been net sellers, withdrawing ₹12,643 crore from Indian equities in February alone. On February 11, FIIs sold ₹4,486.41 crore worth of equities. Amongst all these news, data from AMFI suggests that Net Equity Inflow by Retail Investors has continued strong: https://preview.redd.it/zp0g2qoi9pie1.png?width=1208&format=png&auto=webp&s=7e26f4bb171d44729f3596564fa3733424ed6ba1 # Results that Matter: # Ashok Leyland Ashok Leyland reported strong financial results for Q3FY25. The company's net profit increased by 36% to Rs 762 crore compared to the same period last year. Revenue also grew by 8% to Rs 11,995 crore. The company achieved record-high quarterly profits and revenue, driven by a **33% increase in export volumes and improved sales during the festive season**. Ashok Leyland's EBITDA reached an all-time high of Rs 1,211 crore, with a margin of 12.8%. The company's management **expressed satisfaction with the results**, attributing the success to superior product performance and robust customer engagement. Executive Chairman Dheeraj Hinduja highlighted the **company's focus on profitable growth and continued investment in electric and alternative fuel technologies.** Managing Director Shenu Agarwal noted a significant revival in the medium and heavy commercial vehicle market and expressed optimism about the industry's growth prospects. # Broader Developments: * **India’s Net Direct Tax Collection Jumps 15%**: The tax collection grew to over ₹17.78 lakh crore so far in the current fiscal 2024-25 (FY25). According to data released by the Central Board of Direct Taxes (CBDT) on Tuesday, February 11, the mop-up from the net non-corporate taxes, which include mainly personal income tax, grew 21 per cent year-on-year (YoY) to about ₹9.48 lakh crore. * **Industrial production growth slows down to 3.2% in December:** The production Index showed that the growth slowed to 3.2% in December 2024 from 5.2% in November, mainly due to weaker manufacturing output. Despite the slowdown, December marked the fourth straight month of growth. While power output saw a strong rise to 6.2%, manufacturing grew at a slower pace of 3.0%, and mining growth eased to 2.6%. Key contributors to growth included basic metals, electrical equipment, and petroleum products, while consumer non-durables saw a sharp decline of 7.6%. * **Retail inflation cools down to 4.31% in January as food prices moderate**: India’s retail inflation eased to 4.31% in January 2025 from 5.22% in December, hitting its lowest level since August, mainly due to slowing food price rises. Food inflation dropped to 6.02% from 8.39%, with vegetable prices cooling significantly. Both rural and urban inflation declined, keeping overall inflation within the RBI’s target range. The data, which plays a key role in RBI’s monetary policy decisions, indicates easing price pressures, though some categories like eggs and pulses saw slight increases. # Expert Talks: In his February 2025 Market Outlook presentation, Nilesh Shah of Kotak AMC highlighted several key global and domestic economic trends. **Global Economic Trends:** * **Environmental Focus:** Environmental issues are gaining prominence worldwide. * **Geopolitical Developments:** Conflicts in Ukraine and the Middle East are anticipated to conclude, potentially stabilizing these regions. * **Fiscal and Monetary Policies:** Post the 2008 subprime crisis and the COVID-19 pandemic, countries are improving their fiscal positions, leading to reduced deficits. As inflation decreases, many central banks are cutting interest rates, though exceptions like Japan and Brazil are raising them. https://preview.redd.it/jaeiwkbk9pie1.png?width=1244&format=png&auto=webp&s=d5656bb039ce4a106762fed5d6373aed733964f8 *India has also joined the league post rate cut by RBI last Friday.* * **US-China Relations:** The U.S. and China are engaged in a tariff war, with the U.S. holding a significant trade deficit of about $350 billion. A 10% U.S. tariff hike could reduce China's GDP growth by approximately 0.5%. https://preview.redd.it/e9bu62bl9pie1.png?width=1252&format=png&auto=webp&s=6f584d81813ccbf7279a1cf82614107704e91e2d **Indian Economic Insights:** * **Economic Indicators:** India remains one of the fastest-growing major economies. While the services PMI saw a slight decline, auto sales improved in January, and e-way bill generation reached a record high. https://preview.redd.it/c9ka6j7m9pie1.png?width=1262&format=png&auto=webp&s=4b37b31ee6ad21fa9123f61f4abbb3159d706d5f * **Agriculture and Rural Demand:** A favorable monsoon has led to a bumper Kharif crop, with reservoir levels above the 10-year average, benefiting the Rabi crop. Consequently, rural demand is improving, outpacing urban demand in recent months. https://preview.redd.it/imlody1n9pie1.png?width=1260&format=png&auto=webp&s=e9d4b4142d4d5e5c9ca9d3843739b581e7fb27eb * **Corporate Health:** Indian corporate balance sheets are strengthening, with improved cash flows and reduced debt levels, suggesting a potential uptick in the capital expenditure cycle. **Budget Highlights:** * **Fiscal Prudence and Growth:** The budget emphasizes fiscal discipline, reducing the fiscal deficit below 4.4% for the next year. It boosts consumption by providing a tax rebate of ₹1 lakh crore to taxpayers while maintaining a focus on capital spending. * **Capital Expenditure:** There's a projected 17.4% growth in capital expenditure for the next year, aiming for a combined central and state capex of ₹15.5 lakh crore. **Equity Market Observations:** * **Valuations:** The market capitalization to GDP ratio stands at 132%, above the 20-year average of 87%. Large-cap stocks appear more reasonably valued compared to mid and small-cap stocks. * **Earnings Growth:** Corporate profits have risen from about ₹4 lakh crore in FY20 to ₹15 lakh crore in FY24, with expectations to reach ₹18 lakh crore in the next two years. * **Foreign Portfolio Investments:** FPIs have been net sellers in recent months, withdrawing close to $20 billion over the last four months. However, domestic institutional investors continue to inject funds, mitigating the impact of FPI outflows. **Investment Strategy:** * **Equity Allocation:** Given current valuations, an overweight position in large-cap stocks is recommended, with a neutral stance on overall equity allocation. * **Fixed Income:** With expectations of further rate cuts by the RBI, investing in long-duration bonds over a 12 to 18-month horizon could offer both income and capital appreciation. * **Gold:** Gold prices have risen significantly since March 2020. Continued demand, especially from countries like China, is expected to support prices moving forward. In summary, while global and domestic challenges persist, prudent fiscal management, strategic investments, and a focus on sustainable growth position India favorably in the current economic landscape. Read the entire presentation here: [https://www.kotakmf.com/kotakmf/reportupload/download/Monthly/4999/2025/1](https://www.kotakmf.com/kotakmf/reportupload/download/Monthly/4999/2025/1) Link to the blogpost: [https://sabiduriacapital.substack.com/p/market-notes-12th-february](https://sabiduriacapital.substack.com/p/market-notes-12th-february)