MARKET UPDATE
Indian equity markets continued their forward march with another robust monthly performance aided by Global liquidity and lower crude oil prices and improvement in the monsoon data. The external backdrop was mixed with divergent economic data from key countries. Geo-political developments had limited impact on investor sentiment. Defensives – Health Care, IT Services and Consumer sectors – outperformed. Utilities, Materials and Telecom sectors underperformed ( This is the 4th consecutive month that Defensives and Exporters have outperformed and economy sensitive sectors, particularly linked to the investment cycle have underperformed). 2Q FY GDP growth of 5.7%yoy was higher than consensus expectations. The acceleration has however been boosted largely by government spending and growth in agriculture sector. June IP (Industrial Production) gain of 3.4%was lower than expectations. Inflation prints – July CPI at 8.0%was higher than expected primarily on account of the surge in vegetable prices. The sequential trend in core CPI was also disappointing. Separately, July trade deficit remained contained at US$12.2 bn. RBI left the key rates unchanged though The Statutory Liquidity Ratio (SLR) requirement has been reduced by a further 50 bps to 22%of Net Demand and Time Liabilities (NDTL). The HTM(Health to Maturity) investment limit has also been reduced from 25%to 24%.
FIIs invested a meaningful US$1.1 bn in Indian equities over August 2014. They were buyers of Indian debt also and invested US$2.7 bn. DIIs also turned buyers over the month led by mutual funds. Insurance companies sold US$697mn,whilemutual funds bought US$961mn respectively of equities over the month of August 2014. All the above factors propelled the S&P BSE Sensex by 2.87% and the CNX Nifty by 3.02%. Midcaps underperformed the large cap peers whilst the Small caps continued their
outperformance over the other two indices. Auto was the best performing sector followed by pharma. Metals and Reality were the two big negative sectors while the other high beta sectors and Capital Goods also underperformed for the month.
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