What are the likely trends that can trigger a rally in the market?
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Most large markets of the world – developed and developing – are significantly up, so far this year. India is one of the worst performing markets. As of early November MSCI World Index is up by 19.3 percent; Nifty, in contrast, is up by only 7.3 percent YTD. The relevant questions are: Why this underperformance? When will India catch up? What are the likely triggers that can fuel a rally? The bull run in the market post-Covid, which took the Nifty from the Covid low of 7511 in March 2020 to 26216 in September 2024, was driven by sustained capital flows, particularly from new investors. This rally had fundamental support from earnings growth which grew by 24 percent CAGR during FY21-24. The capital flows into the market from exuberant retail investors, and DIIs flush with funds, continued unabated; but the fundamental support to the rally was lost when earnings growth dipped sharply to a pedestrian 5 percent in FY25. This dip in earnings g...