JOIN USRisk assets outperform safe havens in November
Riskier asset classes are heavily outperforming safe havens in November as a higher number of the surplus global institutional liquidity is being pushed to stock markets. However, amid biting economic hardship, people are selling their holdings to improve their liquidity position.
Benchmark equity indices have been touching record peaks every day and have rallied 12% so far in the month of November. The rally in stocks has been propelled by foreign fund inflow. In a record buying spree, foreign investors have parked a net of Rs 51,000 crore in Indian markets. On the other hand, domestic fund houses have sold equities worth little over Rs 35,000 crore.
"The market rally continues on account of global liquidity, parts of which are filling India allocations, though now ETFs form a not an insignificant part of that. The real story will play out once when governments/central banks turn off the tap," said Anubhav Srivastava, Partner, Infinity Alternatives.
As stocks see massive rallies, gold seems to have lost sheen. Since the beginning of this month, gold prices for December futures are have been declining and have dipped by 3.3% per tola (10 grams) in Multi Commodity Exchanges (MCX). Gold prices have been falling as people are realising their returns from flight to safety and move to riskier assets over an optimistic outlook after vaccine efficacy news
"Gold has been range-bound as economic hardships bite and retail investors liquidate to either book profits or to stave off cash shortfalls," said Srivastava.
On the other hand, backed by an unprecedented foreign fund inflow and a weaker dollar, the rupee had rebound by almost 1% against the US dollar and in the intra-day touched sub-74 level of 73.96 against the greenback.
In the bond market, which has mostly been range bound, there has been a bit of selling of the 10-year government securities as the bond yields have been oscillating in the range of 10 basis points -- from 5.80% to 5.90%. The bond yields have been coming down as the government has announced the issuance of a new 10-year paper to finance its bulging deficit.