What Is Happening In The Markets ......
Indian equity markets witnessed some volatility after the Union Budget as investors booked some profit post the event and after the significant run up witnessed last year.
The Union Budget has paved the way for the increased expenditure on building infrastructure, domestic manufacturing and increased foreign capital. All these measures will lead to a structural improvement in economic growth and a sustained improvement in corporate earnings after a few quarters.
The Finance Minister has shown pragmatism in doing away with Wealth Tax and increasing the surcharge on the super rich. Even though the budgeted fiscal deficit for FY16 has been pegged at 3.9% vs. expectation of 3.6%, the incremental deficit is being earmarked for infrastructure spending while a concrete mechanism to dissuade black
economy is encouraging. The Finance Minister avoided fulfilling the short-term wish-list of many and focused on growth, investments and social objectives.
The latest quarterly results of Q3FY15 saw more disappointments than positive surprises with most companies reporting a subdued performance. The management commentary, however, was neutral to positive, with most companies optimistic on a revival of the capex and investment cycle over the medium to long term, going forward. The Sensex (ex-banks & NBFCs) topline declined 3.0% YoY. EBITDA
margins came in muted despite companies benefiting from lower commodity prices (RM as a percentage of sales came in at 42.2% in Q3FY15 vis-à-vis 46.0% in Q3FY14) on account of negative operating leverage realised due to subdued sales. The Sensex PAT in Q3FY15 was down 10.9% YoY. PAT de-growth was largely on account of a fall in operating profit and rise in depreciation (up 9.6% YoY due to a
change in Company’s Act).
Outlook
The focus of the Union Budget on infrastructure development, domestic manufacturing, encouraging foreign capital and ease of doing business
are measures will go a long way in improving the structural medium term outlook for the economy.
Although earnings growth may remain muted in the next couple of quarters, it is expected to improve significantly in FY17 and FY18. The same may keep market sentiments upbeat.
The structural medium to long term outlook for the Indian equity market remains positive on lower commodity prices, particularly crude oil, expectations of further rate cuts by the RBI and policy announcements by the government to spur investments and, consequently, overall growth.
Volatility, however, in the near term is likely to increase on global cues especially at current higher levels. Investors should avoid putting lumpsum amounts at current levels. However, any sharp correction should be utilised to accumulate and follow a buy on dips strategy.
Caution is required in midcaps and small caps mutual funds as they have significantly outperformed large caps in the current market rally since September 2013. Therefore, if the overall market volatility increases, midcap and small caps may underperform.
Happy Investing
Source : Icicidirect.com
Indian equity markets witnessed some volatility after the Union Budget as investors booked some profit post the event and after the significant run up witnessed last year.
The Union Budget has paved the way for the increased expenditure on building infrastructure, domestic manufacturing and increased foreign capital. All these measures will lead to a structural improvement in economic growth and a sustained improvement in corporate earnings after a few quarters.
The Finance Minister has shown pragmatism in doing away with Wealth Tax and increasing the surcharge on the super rich. Even though the budgeted fiscal deficit for FY16 has been pegged at 3.9% vs. expectation of 3.6%, the incremental deficit is being earmarked for infrastructure spending while a concrete mechanism to dissuade black
economy is encouraging. The Finance Minister avoided fulfilling the short-term wish-list of many and focused on growth, investments and social objectives.
The latest quarterly results of Q3FY15 saw more disappointments than positive surprises with most companies reporting a subdued performance. The management commentary, however, was neutral to positive, with most companies optimistic on a revival of the capex and investment cycle over the medium to long term, going forward. The Sensex (ex-banks & NBFCs) topline declined 3.0% YoY. EBITDA
margins came in muted despite companies benefiting from lower commodity prices (RM as a percentage of sales came in at 42.2% in Q3FY15 vis-à-vis 46.0% in Q3FY14) on account of negative operating leverage realised due to subdued sales. The Sensex PAT in Q3FY15 was down 10.9% YoY. PAT de-growth was largely on account of a fall in operating profit and rise in depreciation (up 9.6% YoY due to a
change in Company’s Act).
Outlook
The focus of the Union Budget on infrastructure development, domestic manufacturing, encouraging foreign capital and ease of doing business
are measures will go a long way in improving the structural medium term outlook for the economy.
Although earnings growth may remain muted in the next couple of quarters, it is expected to improve significantly in FY17 and FY18. The same may keep market sentiments upbeat.
The structural medium to long term outlook for the Indian equity market remains positive on lower commodity prices, particularly crude oil, expectations of further rate cuts by the RBI and policy announcements by the government to spur investments and, consequently, overall growth.
Volatility, however, in the near term is likely to increase on global cues especially at current higher levels. Investors should avoid putting lumpsum amounts at current levels. However, any sharp correction should be utilised to accumulate and follow a buy on dips strategy.
Caution is required in midcaps and small caps mutual funds as they have significantly outperformed large caps in the current market rally since September 2013. Therefore, if the overall market volatility increases, midcap and small caps may underperform.
Happy Investing
Source : Icicidirect.com
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