An important trend in the market is the surge in retail investor participation as indicated by the sharp increase in new demat accounts at 2.36 million opened in June, says V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services. New retail investors jumping on to the market bandwagon normally happens at the peak of a rally. This is a sign for caution, he said. The FPI liquidity-driven rally is showing signs of losing steam. He said some of the leading indicators like credit growth for Q1 from banking majors like the merged entity HDFC Bank indicate a possible slowdown in the economy.

Two-wheeler sales in June indicate that demand continues to be a problem in rural areas. In brief, the macroeconomic scenario, though good, is not so bullish as to warrant the continuation of the rally, which has already run a bit ahead of fundamentals, he added. He cautioned that investors should not chase low-grade small-cap stocks at this juncture and stay invested in high-quality large-caps. Automobiles sector's 1QFY24 was a mixed bag from demand perspective, with signs of volume growth moderation in some segments, Motilal Oswal Financial Services said in a report. Demand largely remained intact for domestic 2Ws and PVs, whereas volumes declined for CVs (due to pre-buy in 4QFY23) and tractors (high inventory and Navratris in March-23). Two-wheeler exports remained weak.