Health of Wealth - October 2024

1. Silver is Shining....But Why?

As of Oct 31, 2024, silver has reached Rs 1,03,200/kg delivering impressive returns of 42.36%(YoY).

IMPACT: POSITIVE 

In general, apart from being a precious metal. silver has many industrial use cases in industries like medicine, solar energy, EVs etc. 

Global demand for silver has risen sharply in recent months, primarily driven by the electric vehicle (EV) industry and the growing use of solar energy technologies. Silver’s critical role in electronics, solar panels, batteries, and increasingly in semiconductors, has made it an essential component in modern technology.

This growing industrial demand has pushed silver prices higher, particularly in markets like India, where prices have recently surpassed ₹100,000 per kilogram.

Impact of China’s Stimulus and US Fed Rate Cuts:

As one of the world’s largest consumers of silver, China plays a key role in driving demand. The country’s recent economic stimulus—focused on infrastructure and manufacturing—has significantly boosted demand for silver.

Similarly, the US Federal Reserve’s decision to cut interest rates in September 2024 has further supported silver prices, with lower interest rates typically weakening the US dollar and making precious metals more attractive to investors.

However, please be aware that silver has been one of the most volatile metal historically and any investment in this metal must be done with proper asset allocation strategy.

2. An Update on India’s Monsoon 2024

India's monsoon season for 2024 has ended with an 8% surplus rainfall, according to the Indian Meteorological Department (IMD).

IMPACT: POSITIVE 

India's monsoon season for 2024 (June to September) ended with 108% of the long-period average (LPA) rainfall, marking the season as above normal, as forecasted by the Indian Meteorological Department (IMD).

Monthly Rainfall:

Rainfall over the country was 89% of LPA in June, 109% of LPA in July, 115% of LPA in August, and 112% of LPA in September, reflecting a gradual increase in rainfall as the season progressed.

Despite some regional variations in rainfall, the overall monsoon season was a positive one for India. However, localized flooding was reported in certain regions due to heavy rains.

3. Intense FII Selling in Oct 2024

FIIs sold Rs 94,017 Cr of Indian equities in October 2024.

IMPACT: NEGATIVE 

The FII’s are offloading their shares from the Indian Equity Market, pulling out Rs. 94,017 crores from the Indian exchanges (highest ever FII selling in a single month) in October 2024.

The FII selling pressure led to a sharp decline in Indian benchmarks, with the NIFTY 50 dropping by 6.22% (MoM) and the Sensex falling by 5.82% (MoM) in October.

Geopolitical tensions, weak Q2 earnings, and global economic conditions, and premium valuations have fueled this sell-off.

This sell-off seems huge in absolute terms, however it is merely 0.2% of total market cap of Indian equity market. It is not the quantum of FII exit, but the intensity of it is creating panic.

While the FII sell-off appears intense, the inflows by domestic institutional investors (DIIs) have helped the Indian markets compensate to some extent in October. Domestic Institutional Investors (DIIs) have stepped-in to counterbalance the FII exodus, pouring ₹107,255 crore worth of Indian Equity (highest ever DII buying in a single month).

4. Earnings review of Nifty 50 Co's in Q2FY25

Top five stocks account for ~140% of the incremental profit YoY

IMPACT: NEGATIVE 

Among Nifty constituents, 34% exceeded PAT estimates, while 28% missed estimates.

Weak Q2 Earnings: Corporate earnings in Q2 FY25 were weak due to low consumption, stress in some banking and financial segments, and reduced government spending.

Lower Earnings Growth: Nifty’s earnings growth forecast for FY25 is now just 5%, the lowest since FY20, after a 7% reduction in the last six months.

Hope for Improvement: Earnings may recover in the second half of FY25 as government spending picks up, the kharif crop performs well, and rural demand improves.

Valuations Still High: Despite a 10% market correction, Nifty is trading at a fair valuation (20x forward P/E), but midcap stocks remain expensive (~29x forward P/E).

Source: Motilal Oswal

5. GST Exemption on Life and Health Insurance Premiums

Senior Citizens and Term Life Policies May Benefit, with a Decision from GST council Expected by November's End.

IMPACT: NEUTRAL 

The GST Council is considering exempting premiums paid for life and health insurance from GST.

Key changes being considered include:

1. Exemption of GST on term life insurance premiums for all individuals, including family plans.

2. Exemption for health insurance premiums paid by senior citizens, regardless of coverage.

3. For other citizens, health insurance coverage up to ₹5 lakh may be GST-exempt, with the existing 18% GST rate applied.

The final decision by GST Council is expected by the end of November 2024.