In the month of October Large, mid- and small-sized Indian equities performed within a relatively tight range. So, how will the market perform in November? Here is what experts have to say...

1. DOMESTIC EQUITY MARKET OVERVIEW AND
WHAT TO EXPECT IN NOVEMBER 2021
Harish krishnan of Kotak Mahindra MF, Neelotpal Sahai of HSBC MF, Alok Agarwal of PGIM India MF and Sorbh Gupta of Quantum
MF share with us their views on the equity market.
AMFI Registered Mutual Fund Distributor

2. DOMESTIC EQUITY MARKET - PERFORMANCE SNAPSHOT FOR OCTOBER 2021
In first half of
October, Nifty 50
Index rose as much
as 4%, before
reversing direction
and trimming the
gains down a 0.4%
total return by the
month’s end. Large,
mid- and small-sized
Indian equities
performed within a
relatively tight
range.
Source : www.nseindia.com, internal calculation
1 Mon th Change % 1 Year Change % 3 Years Change % 5 Years Change % 10 Years Change %
Nifty 50 Ind ex 0.4% 53.2% 20.8% 16.9% 14.1%
Nifty Next 50 Ind ex -0.7% 54.3% 17.6% 13.6% 16.8%
Nifty Midcap 100 In dex 0.3% 79.5% 22.1% 15.0% 16.8%
NSE Smallcap 1 00 Ind ex -1.1% 89.8% 22.3% 11.7% 13.2%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Trailing Returns
Nifty 50 Index Nifty Next 50 Index Nifty Midcap 100 Index NSE Smallcap 100 Index

3. OUT-PERFORMERS & UNDER-PERFORMERS OF OCTOBER 2021
PSU Banks and Auto were the best performing sectors rising 13.8% and 6.6% respectively in the month of October. Media, Private Banks,
Financial Services, Energy and Services sector also gained in the range of 5% - 0.6%. FMCG, Pharma, Realty, IT Services and Metals declined
in the range of 5.5% - 0.9%.
Source : www.investing.com; internal calculation
13.8%
6.6%
5.0% 4.5%
3.8%
2.7%
1.7%
0.5%
-0.9%
-1.8%
-2.9%
-4.1%
-5.5%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
PSU Banks Auto Media Banks Private Banks Financials
Services
Energy Services Metals IT Services Realty Pharma FMCG
Performance in Oct 2021

4. REVIEW OF VALUATIONS BASIS TRAILING PE & PB RATIOS
Looking at the PE ratios, valuation of most of the indices have corrected in last one year. There have been sharp correction in PE valuation of
Mid-cap index led by healthy earnings and low cost of capital. However, looking at the PB ratio changes in last one year, large caps are looking
less over-valued as compared with mid and small caps, though valuation gain can be seen in all the segments from their one year ago
valuations. Elevated valuations makes the markets vulnerable to any sharp shifts in global liquidity, inflation expectations & supply chain
disruption due to covid-19 resurgence.
Source : www.nseindia.com, internal calculation

5. WHAT TO EXPECT IN NOVEMBER 2021 – VIEWS FROM FUND MANAGERS
HARISH KRISHNAN, EVP & EQUITY FUND MANAGER, KOTAK MAHINDRA MF
Source : www.cafemutual.com
¡ While we are enthused by the strong economic growth prospects as well as improving fundamentals of various businesses, markets
have risen a bit too fast too soon
¡ Corporate earnings, taper announcement by US Fed Reserve, run up to various state elections as well as rising commodity prices all
can potentially impact markets in the medium term
¡ Markets are richly valued across most sectors & market caps and as economy normalized post covid, we expect the profit pool of Indian
companies to improve
Commentary on Sectors
¡ Positive on engineering goods, home building, consumer discretionary like travel, retailing and companies focused on global value
chains like engineering goods, IT, digital etc.
What to recommend
¡ With valuation rising across the board, larger companies have a slightly better risk-adjusted profile

6. WHAT TO EXPECT IN NOVEMBER 2021 – VIEWS FROM FUND MANAGERS
NEELOTPAL SAHAI, HEAD - EQUITIES, HSBC MF
Source : www.cafemutual.com
¡ Markets in the near term could remain volatile given the backdrop of high valuations. Earnings growth should eventually catch up with
valuations and this will mean that the equity market returns will be mirroring earnings growth over the medium to long term
¡ Earnings momentum & corporate commentary, inflation trends (both global & domestic), global commodity prices (especially crude oil
prices), China real estate crisis, adverse impact of sub-optimal monsoon, geo-political risks are the key triggers
¡ Traditional valuation metrics (P/E, P/B) show markets are above historical average across market caps
¡ Small cap earnings growth assumptions are significantly higher followed by midcap and Nifty on a blended 12-month forward basis
Commentary on Sectors
¡ Over the next 2-3 years, we are positive on private banks, healthcare, real estate, cement & chemicals and industrial sectors
What to recommend
¡ Investors with a lower risk appetite can consider aggressive hybrid or large cap funds
¡ Investors with a higher risk appetite along with a longer investment horizon can consider flexi-cap/mid or small cap funds

7. WHAT TO EXPECT IN NOVEMBER 2021 – VIEWS FROM FUND MANAGERS
ALOK AGARWAL, SENIOR FUND MANAGER - EQUITY, PGIM INDIA MF
Source : www.cafemutual.com
¡ Market is expected to be range-bound in the near term owing to (1) Around the corner Fed tapering (2) Rising inflationary and
corporate margin pressures are here to stay along with supply-side challenges (3) Excessive valuations in select pockets and (4)
Demand and earnings optimism well factored-in for the medium-term
¡ India is entering the festive season and initial signs reflect good demand
¡ Although equity valuations are expensive compared to historical averages yet they are cheaper than bond valuations
Commentary on Sectors
¡ A closer look at earnings estimates shows that incremental growth in net profits is likely to come from domestic consumption sectors
linked to recovery in the economy, banks and global commodity sectors
¡ Additionally, we are also overweight on digitization, industrials and healthcare
What to recommend
¡ From a 6-12 month perspective, it makes sense to have a more balanced allocation, rather being too aggressive or too conservative

8. WHAT TO EXPECT IN NOVEMBER 2021 – VIEWS FROM FUND MANAGERS
SORBH GUPTA, FUND MANAGER - EQUITY, QUANTUM MF
Source : www.cafemutual.com
¡ Resurgence of Covid-19, the US Fed’s tapering & subsequent interest rate hikes and higher than expected inflation are some of the macro
variables which can increase market volatility in the next few months
¡ Domestic institutions are again seeing positive flows in the last few months from retail investors. In the medium & long term, India’s nominal
GDP growth will look better than the western world, thereby making it a sought-after destination for yield & growth-seeking long term global
investors
¡ Markets are heterogeneous. Not everything is cheap or expensive at the same time (barring times of severe global dislocation like Oct 08 or Mar
20). After the recent rally, the benchmark indices appear expensive.
Commentary on Sectors
¡ We believe some of the large banks, specialized NBFCs, automobiles, PSUs & Tech (global cyclical) and materials are well placed to benefit from
cyclical economic recovery
What to recommend
¡ Investors should create a diversified equity portfolio through a mix of 5 to 6 schemes of varying styles and market capitalizations. Given the near-
term volatility, a time horizon of 3 to 5 years is recommended for any equity investment
¡ A value fund as the anchor fund (20% to 25% of total exposure) layered with funds of different market capitalizations is recommended
¡ Thematic-ESG funds could also be explored

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