Bad January Doesn’t Mean Lost Year for Indian Stocks

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(Bloomberg) — Before the trading day begins, we give you a summary of the key news and events likely to move the markets. Today we look at:

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• Slow January
• Risks of overownership
• Retail love of stocks

Good morning, I’m Chiranjeevi Chakraborty, equity correspondent in Mumbai. While most Asian stocks rose in weak trade, with many regional markets still closed for the holidays, traders in India are likely to face a weak start. With our eyes set on 2025 and most foreign investors on vacation, bulls and bears will likely refrain from making bold bets.

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A bad start isn’t half the battle for stocks

A weak start to the year may not be a bad omen for India’s stock market. Nifty started each calendar year with monthly losses for the past six years, only to post strong gains by the end of the year. Seasonality suggests that traders should prepare for a muted January, with an average loss of more than 1%, based on the past two decades. Expect sharp volatility as investors deal with US President-elect Donald Trump’s trade policies, extended valuations for Indian stocks, a slowing economy, and strong domestic liquidity.

Property, Defense Stocks: The Risks of Crowded Trades

Real estate and defense are two sectors that have no shortage of fans among analysts. The fundamentals for both appear solid at the moment: domestic production is driving growth in the defense sector, while strong demand for homes and office space is fueling optimism among property developers. However, metrics for both sectors have been suffering since June. Brokers suggest that one reason may be that many people are already invested in these sectors, making it difficult to attract new believers. This trend in the chemicals sector began more than three years ago.

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Households are throwing everything they have into stocks

The belief that Indian households have low exposure to equities may no longer hold water. Emkay Global reports that one in three rupees of household wealth is now in the stock market, directly or indirectly. Bulls see this as a sign of market resilience – evidence that the market is capable of weathering any challenge 2025 may bring. But skeptics warn it could backfire if corporate profits decline. However, Emkay expects household flows to rise through 2030, supporting a multi-year rally in a market that has already entered its ninth straight year of gains.

Analyst movements:

• Bharat Electronics rates new buyout at Phillip Secs; 390 rupees
• Sagility India rates new overweight at JPMorgan; 54 rupees
• MAS Fin has rated New Buy on Anand Rathi Securities; 365 rupees

Three great reads from Bloomberg today:

• Ola Electric adds 3,200 stores, seeks to overcome consumer woes
• Russia attacks Ukrainian power grid in Christmas attack
• Big Take: Japan’s insurance scandal unfolded inside karaoke bars

And finally…

Finally, the market took a much-needed break over the past two sessions. While it is not surprising that volatility tends to be quiet at this time of year, what stood out was the sharp decline in the NSE Indian Volatility Index – also known as the Fear Index – especially after a tough week in which it fell by almost 5%. The easing of volatility comes with a disclaimer: Over the past decade, the India VIX has always risen in January. So, you may want to keep your horses – or reindeer – for now.

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

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