Value V/s Growth: Which theme is playing out better on Dalal Street?


The first week of March started on a high note with India’s December quarter GDP growth returning to the positive territory. India is one of the few major economies that sailed out of a technical recession after two successive quarters of negative GDP growth. All credit for this recovery goes to the government expenditure and low interest rates being maintained by RBI, which led to the reopening of the economy and aided domestic consumption.

Market participants, especially FPIs, validated the GDP figures and turned exuberant on domestic stocks, pushing the benchmark indices higher. Another data point that cheered the Street was GST collection, which crossed the Rs 1 lakh crore mark for the fifth time in a row. All these statistics are pointing to a strong rebound in economic activity, especially in the industrial manufacturing and infrastructure fronts, adding to the optimism in the financial markets.

With equities again inching towards their previous highs, the debate over of growth vs. value investing has resurfaced. This disagreement was stirred by movement of the MSCI World Value Index, which rose 4.5% in contrast to a mere 0.3% gain on the MSCI World Growth Index in February. In India too, commodity stocks have hardly ever beaten the benchmark indices for a sustained period of time, making them a good fit as value plays. Resembling MSCI index, even a perpetual laggard such as the Nifty Commodities index managed to outperform the benchmark index during the week gone by. Thus, value stocks have picked up momentum for some time now and going ahead too, the value theme is likely to play out, as growth picks up in the second half of 2021.

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Faster vaccine rollout, strong Q4 numbers from the low base of last year and a growth revival in urban India will all add to the value investing party. Hence, investors should keep looking for value buys for investment.

Event of the week
Auto sales numbers for February 2021 have been fairly positive, fuelled largely by a recovery in the urban market and strong traction in demand. Major passenger vehicle makers, especially two-wheeler makers, posted impressive double-digit YoY growth. Furthermore, tractor sales have yet again managed to clock a robust 20%+ YoY growth signalling sustained rural recovery.

This is one sector where an exorbitant rise in fuel prices haven’t had any significant impact yet. But if the escalation continues, then buyers’ sentiment is likely to get impacted. It would be imperative to pay heed to the auto numbers in the forthcoming months to understand the underlying impact of fuel prices on the future growth trajectory.

Technical Outlook
Nifty50 closed the week on a positive note on the weekly chart, but the markets witnessed a choppy trading week with negative market breadth. The index closed positive during the week only because of some heavyweights like RIL, and , otherwise it was losing momentum on the upside. Other global indices such as S&P500, Kospi, Taiex all ended the week on a weak note.

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On the upside, Nifty is likely to remain capped at the immediate resistance of 15,270, whereas on the downside, the immediate support is now placed at 14,630 level. We suggest traders maintain a neutral outlook.

Expectation for the week
As no major event is lined up for the coming week in India, all eyes would be on the US for fresh triggers. Any unanticipated outcome of 3/10/30 year treasury auction lined up for next week in the US would directly impact bond yields and, in turn, equity valuation. The IPO season is going on in full swing in India and Dalal Street is likely to see a number of primary issues in March, trying to ride the momentum of abundant liquidity and strong investor sentiment.

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Value and cyclical stocks have gained traction over the past few months and investors should continue to keep their exposure to these value and cyclical stocks. Since gold has retraced from its highs, investors can allocate a small portion of their portfolio towards gold for adequate diversification.

Nifty50 closed the week at 14,938, up 2.81%.





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