Bad January Doesn’t Mean Lost Year for Indian Stocks

(Bloomberg) -- Before the trading day starts we bring you a digest of the key news and events that are likely to move markets. Today we look at:

Good morning, this is Chiranjivi Chakraborty, an equities reporter in Mumbai. While most Asian stocks gained in thin trading, with several regional markets still shut for holidays, traders in India will likely face a muted start. With one eye on 2025 and most foreign investors on vacation, bulls and bears are likely to hold off from making bold bets.

A bad start isn’t half the battle lost for stocks

A weak start to the year may not be a bad omen for India’s stock market. The Nifty has kicked off each calendar year with monthly losses over the past six years, only to post strong gains by the year-end. Seasonality suggests traders should brace for a muted January, with an average loss of more than 1%, based on the last two decades. Expect sharp swings as investors navigate US President-elect Donald Trump’s trade policies, stretched valuations in Indian equities, a slowing economy, and strong domestic liquidity. 

Property, defense stocks: perils of crowded trades

Real estate and defense are two sectors that have no shortage of cheerleaders among analysts. The fundamentals of both appear solid at the moment: domestic production is driving growth in defense, while strong demand for homes and office space fuels the optimism for property developers. Yet, the gauges for both sectors have been struggling since June. Brokers suggest one reason could be that many people are already invested in these sectors, making it difficult to attract fresh believers. This trend has been playing out in the chemicals sector for over three years now.

Households go all-in on stocks

The belief that Indian households have low exposure to equities may no longer hold water. Emkay Global reports that one in every three rupees of household wealth is now in the stock market, directly or indirectly. Bulls see this as a sign of market resilience — proof that the market can tackle any challenge that 2025 might bring. But skeptics warn that it could backfire if corporate earnings fall short. Still, Emkay predicts rising household inflows through 2030, supporting a multi-year rally in a market already into its ninth straight year of gains.

Analysts actions:

Three great reads from Bloomberg today:

And, finally.. 

The market finally took a much-needed breather over the past two sessions. While it’s no surprise that volatility tends to cool off this time of the year, what stood out was the sharp drop in the India NSE Volatility Index — also known as fear index — especially after a rough week where it tumbled almost 5%. The ebbing in volatility comes with a disclaimer: for the last decade, the India VIX has always spiked in January. So, you might want to hold onto your horses — or reindeer — for now.

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--With assistance from Kartik Goyal, Savio Shetty and Ashutosh Joshi.

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