Last week, we spoke about Nifty’s performance when its PE falls below 20x. The average 1-year forward returns are 15.2% when PE drops below 20x. Currently, we are trading at 19.9x. This is indicating a lucrative level for market participants to pick good quality stocks for generating higher returns going forward.
Today we will look at why the markets are likely to remain optimistic in July despite all the macro headwinds.
In the last three months i.e. from April to June, the Nifty50 index has fallen by 9.65%. This fall makes it the tenth time since 2002 that the benchmark has fallen for three consecutive months.
The interesting data point from these falls is that on all the previous nine occurrences the market bounced back and delivered a positive return in the next month.
The average one-month return after the previous nine such falls has been 6.4%. The last three consecutive monthly declines happened during the Covid outbreak. Markets dropped in all three months from January-March 2020. Nifty bounced back with the highest gains of 14.7% in April 2020.
AgenciesThis makes a strong case for an optimistic end to the month of July. Another historical data point that makes the case stronger is that July has been a favorable month for the market. From 2002 to 2021, July has ended on a positive note for 75% of…
