Historical trend shows stocks may outperform in H2

Bull failed to consolidate after conquering the 10000-point peak, but the long-term path seems to be smooth, going by the historical trend of benchmark indices for the second half of the year.

Nifty has returned positive gains for seven years in the last ten years, of which four times it gave double-digit returns.

Monsoon has played a pivotal role in determining market trajectory, with gains or losses following the frequency of rains showers for that particular year, according to the data.

For example, with the average monsoon in 2002, Sensex and Nifty climbed 2.69% and 2.30% in July to December period against a 0.04% in Sensex and a minuscule Nifty rise in 0.24% in the first half of that year. In 2003 when 21 states received normal rainfall, Sensex and Nifty rose 61.99% and 66.25% in the second half as against 6.40% and 3.09% in the first. Similarly, the following years too saw a market upsurge in their second half on the back of normal or generous rains in the first half.

This year the monsoon has been above normal so far.

Both Sensex and Nifty have gained 16.27% and 16.40% respectively in the first half of 2017. They have totalled gains of 2.35% and 2.96% respectively, so far this month.

Experts said sentiment may stay buoyant in the second half on expected good results, stabilising goods and service tax regime, strong domestic liquidity, narrowed fiscal deficit numbers and better monsoon for the second consecutive year.

Nitasha Shankar, senior vice-president and head of research, YES Securities (I) Ltd, said, "Our recommendation to long-term investors is to remain invested in markets as India's shining story still has a lot of steam in it."

However, owing to the aberrations caused by the global geopolitical situation, prudence is called for, so as to book profits whenever new peaks are attained, Shankar said.

But experts also add caution.

The global environment is not looking up given Trump reforms especially on tax break which was being touted the most, are not transpiring, believes Sanjiv Bhasin, executive vice-president, IIFL Ltd.

"Owing to earnings, unjustified surge in valuations and global market conditions, the euphoria may not last. End of the year should see should Sensex hitting 33000," Bhasin told DNA Money.

Currently, inflows in emerging markets are healthy. However, whether the trend will continue or not is yet to gain clarity, experts said.

The foreign institutional investor (FII) allocation of funds in the second half of 2017 will also determine the market trajectory up to a large extent.

Local stocks and mutual funds, on the other hand, are having a whale of time. Foreign institutional investors (FIIs) too may pump in more money into Indian markets in the remaining half of the current calendar year, experts said.

The second half of the year will continue to see FII flows on the back of gradual rate hike by the US Federal Reserve, Yogesh Mehta, vice-president, equity advisory, Motilal Oswal Securities Ltd, told DNA Money.

"Any correction will provide a buying opportunity in the market, Nifty may remain in the range of 9500-10500 till December-end," Mehta said.

However, the losses or gains of the markets in the past ten years have also shown a trend where in the indices have packed in meatier gains in the latter part of the year if the former has suffered losses or has made minuscule gains, and vice versa. In 2014, Sensex and Nifty climbed 20.21% and 20.78% respectively (January-June) while surging only 7.77% and 8.49% (July -December). The indices inched up 0.99% and 1.02% the following year, succumbing to losses (6.79% and 5.99%) in the second half.

On the other hand, 2016 witnessed Sensex zooming 3.21% and Nifty rising 4.08% only to tank 1.91% and 1.71% in the remaining part of the year.

BANG ON TARGET

• Nifty has returned positive gains for seven years in the last ten years, of which four times it gave double-digit returns
   
• Both Sensex and Nifty have gained 16.27% and 16.40%, respectively in the first half of 2017