Market Overview for the Month
- Indian equity markets continued their positive streak during the quarter
- Markets remained volatile during the quarter due to key events like Union Budget, RBI policy action and monetary actions by ECB and US Fed. The Q3 corporate results turned out to be a disappointment which further added to market volatility
- Large Caps outperformed both Mid Caps and Small Caps during the quarter
- Union Budget for FY 16 was presented in the back drop of huge expectations. The Union Budget was a step in the right direction by boosting infrastructure investments, encouraging financial savings, taking measures to ease business and maintaining fiscal credibility in the medium term
- We are positive on the equity markets on the back of reforms push agenda of the government, improving macro domestic & external factors and likely re-rating of India
- RBI also provided couple of off-cycle rate cuts (in Jan & Mar) of 25 bps each driven by strong disinflationary force and expectation of better than reported fiscal consolidation
- We maintain our outlook on Indian equity markets of Marginal Overweight. Investors can accumulate equities from a 3 to 5 year perspective
- Bond yields could fall further in the medium to long term on the back of decline in inflation
- Investors with an investment horizon of at least 18 to 24 months can look at investing in long term income, gilt and dynamic bond funds
- Short term income funds can be recommended for investors with an investment horizon of at least 12 to 18 months
- We are positive from a medium to long term perspective with a pro-active inflation targeting RBI and a credible government at the Centre
Equity Market Recap
- Sensex gained by 3.6% during 1st January 2015 to 15th March 2015, the Mid Cap index gained by 3.4%, while Small Cap Index lost 0.13%
- On the sector front, the gainers between 1 st January 2015 to 15th March 2015 were Healthcare (14.8%), Capital Goods (12.1%) & Realty (11.6%), while Metal (-10.7%), Oil &Gas (-4.9%) and Bankex (0.2 3%) were laggards
- Among Sensex stocks Hindustan Unilever (24.2%), Sun Pharma (22. 8%) & HDFC (18.2%) were the top perfor mers during 1st January 2015 to 15th March 2015. While Tata Steel (-19.3%), Bajaj Auto (-17.6%) & Hindalco (-17%) were laggards
- During 1st January 2015 to 15th March 2015, FIIs were net buyers of equity to the tune of `44,433 Cr, DIIs were net sellers to the tune of `6,091 Cr and the domestic MFs bought `8,483 cr worth of equity
Equity Market Outlook And Reccomendations
- Equity markets continued to track both domestic and global cues during the quarter
- As per the Economy Survey 2015, India is in a “sweet spot ” due to lower deficits and high growth. It projected India ’s GDP for FY 16 in the range of 8.1-8.5%. As per IMF, India is poised to be the fastest growing economy in the worl d overtaking China
- Inflation (CPI: 5.37%) was also within RBI’s Jan 2016 CPI target of 6%
- Globally, ECB started its Quantitative Easing (QE) programme in March to arrest slide in growth and inflation in the Euro Zone. US Fed in its recent minutes signalled that it is likely to raise interest rates at some point in 2015
- With the major event of Budget behind, the Govt is likely to take steps such as implementation of GST, plugging the subsidy leakages using Adhaar and Direct Benefit Transfer, enhance industrialization etc. to steer the economy on growth path
- SEBI’s reforms to allow raising municipal bonds, conversion of bad loans into equity would help deepen the financial markets and attract more foreign inflows in the country
- The next event lined up for the markets is Q4FY15 results and guidance (if any) given by the corporates about future. We expect the Q4 results to be muted and ~20% CAGR growth over next 2 years
- We maintain our outlook of Marginal Overweight on Indian markets . At current levels we recommend accumulating equities with a 3 to 5 year investment perspective
- Large Cap, Diversified equity and Mid and small cap mutual funds are advisable
Happy Investing
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