Equity Market Update June 2016
After recovering sharply in March and April from the fall witnessed at the start of the year, Indian equity markets consolidated in May 2016 ƒ
Overall, equity markets seem to be trading in a broad range with value buying emerging at lower levels and some profit booking being witnessed at higher levels ƒ
Inflation rose to 5.39% in April from a six-month low of 4.83% in March. The uptick was largely driven by soaring food price index (6.3% in April vs. 5.2% in March) in the month mainly led by a substantial increase in vegetables, fruits and sugar prices. The surprisingly sharp increase in food prices can be attributed to high temperatures and water shortages in various parts of the country, which could keep certain food prices elevated for a short period while a good monsoon can offset these negative developments ƒ
Beaten down sectors like banking, real estate, consumer goods and capital goods outperformed since Budget in the market recovery. Oil & gas and PSU sectors underperformed on account of negative outlook.
Market Outlook
Currently, Indian markets are being dominated by global factors. Therefore, any development in global capital markets is likely to have an impact on the Indian equity market ƒ
Domestic macroeconomic variables like benign inflation, increased expectations of normal monsoons, implementation of the Seventh Pay Commission along with increased government ordering in sectors like road, railways and power are set to provide the much needed fillip to economic activity ƒ
Indian markets after been in a declining trend from March 2015 to February 2016, recovering some their gains post Budget. Markets seem to have formed a near term bottom in February 2016. Indian markets may consolidate in the near term but the overall downward trend, which started last year, seems to have reversed ƒ
The majority of the Q4FY16 results, so far, have been in line or better than expectations. Sectorally, most companies among auto, private banks & NBFC, cement, telecom and FMCG sectors declared good results. Earnings growth is likely to pick up further in coming quarters. Earnings growth for FY17 and FY18 should be significantly better than that in the last few years ƒ
If global markets remain supportive, Indian markets are likely to perform well as the domestic economic outlook is improving on normal monsoon, government policy action and improved liquidity from RBI. Seventh Pay Commission and OROP remain a trigger for a consumption boost for the economy ƒ
Global markets also seem to have stabilised after a rebound in commodity prices, particularly crude oil. The continued easing of the monetary policy stance by European Central Bank (ECB), Bank of Japan and China along with the dovish stance of the US Federal Reserve while indicating a further rate hike provided the much needed sentiment boost to global investors. Importantly, emerging markets witnessed a return of foreign inflows with most emerging markets outperforming in the last few months. Stability in commodity and currency markets also bode well for global equity markets ƒ
We believe investors should be bullish on equity markets and accumulate on dips for the next two to three years.
Overall, equity markets seem to be trading in a broad range with value buying emerging at lower levels and some profit booking being witnessed at higher levels ƒ
Inflation rose to 5.39% in April from a six-month low of 4.83% in March. The uptick was largely driven by soaring food price index (6.3% in April vs. 5.2% in March) in the month mainly led by a substantial increase in vegetables, fruits and sugar prices. The surprisingly sharp increase in food prices can be attributed to high temperatures and water shortages in various parts of the country, which could keep certain food prices elevated for a short period while a good monsoon can offset these negative developments ƒ
Beaten down sectors like banking, real estate, consumer goods and capital goods outperformed since Budget in the market recovery. Oil & gas and PSU sectors underperformed on account of negative outlook.
Market Outlook
Currently, Indian markets are being dominated by global factors. Therefore, any development in global capital markets is likely to have an impact on the Indian equity market ƒ
Domestic macroeconomic variables like benign inflation, increased expectations of normal monsoons, implementation of the Seventh Pay Commission along with increased government ordering in sectors like road, railways and power are set to provide the much needed fillip to economic activity ƒ
Indian markets after been in a declining trend from March 2015 to February 2016, recovering some their gains post Budget. Markets seem to have formed a near term bottom in February 2016. Indian markets may consolidate in the near term but the overall downward trend, which started last year, seems to have reversed ƒ
The majority of the Q4FY16 results, so far, have been in line or better than expectations. Sectorally, most companies among auto, private banks & NBFC, cement, telecom and FMCG sectors declared good results. Earnings growth is likely to pick up further in coming quarters. Earnings growth for FY17 and FY18 should be significantly better than that in the last few years ƒ
If global markets remain supportive, Indian markets are likely to perform well as the domestic economic outlook is improving on normal monsoon, government policy action and improved liquidity from RBI. Seventh Pay Commission and OROP remain a trigger for a consumption boost for the economy ƒ
Global markets also seem to have stabilised after a rebound in commodity prices, particularly crude oil. The continued easing of the monetary policy stance by European Central Bank (ECB), Bank of Japan and China along with the dovish stance of the US Federal Reserve while indicating a further rate hike provided the much needed sentiment boost to global investors. Importantly, emerging markets witnessed a return of foreign inflows with most emerging markets outperforming in the last few months. Stability in commodity and currency markets also bode well for global equity markets ƒ
We believe investors should be bullish on equity markets and accumulate on dips for the next two to three years.
Happy Investing
Source;Icicidirect.com
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