I hope that the new SAMVAT, 2076 turns out to be a very prosperous year for all of us and keeps the market momentum going
The festival of lights “Deepavali” will mark the beginning of the trading new year-SAMVAT 2076, with the auspicious Muhurat trading session scheduled to be conducted on 27th October 2019 from 6:15 – 7:17 PM
- SAMVAT 2075, though looked good at the SENSEX /NIFTY level, was a bad year for the broader markets. NIFTY is up ~10% yoy since last Diwali, but mid & small caps are down significantly
- The government has taken several measures to boost the economy, such as corporate tax rate cuts & roll back of tax surcharge, but it has failed to cheer up the markets
- The question that is confronting an average investor’s mind is whether to buy or not in the current markets
- Markets were largely supported by domestic liquidity due to strong monthly inflows into equity mutual funds. Net inflows into equity MF in last 12 months were to the tune of Rs.60,000 cr. FIIs have been net buyers to the tune of Rs.20,000 cr though they have been selling heavily over the last six months
- The total AUM of the mutual fund industry increased to in Rs.24.5 lakh cr September 2019 as compare with Rs 22.04 lakh cr in October 2018. Contribution through SIPs remained intact at Rs.8,262 cr in September 2019
- The RBI took a cumulative rate cut of 135 bps over the last 12 months
- FII have been continuously selling the past few months, Rs.16870 cr in July post budget followed by Rs.14828 cr in August & Rs.6624 cr in September
- As per SIAM, India’s passenger vehicle sales slumped 23.7% in September, the eleventh straight month of declines
- The Goods and Services Tax (GST) collections dropped sharply to a 19-month low of Rs.91,916 cr in September
- The monsoon rain this year has been the maximum in 25 years, 10% above the long term average
- Gold prices are now down about Rs.2,000/10 gms from record highs of about Rs.40,000/10 gms hit last month. International gold prices, currently trading at about $1,485/oz vs $1230/oz last year
- Brent crude oil prices remained range bound either side of $60/bbl vs $80/bbl last year
- Consumer Price Index (CPI) inflation climbed to a 14 month high of 3.99%
- Wholesale prices based inflation eased to 0.33% in September
- Index of Industrial Productions (IIP) output contracted 1.1% in August
- US-China trade talks continue
- S&P Global Ratings reduced India’s growth projection for 2019-20 from 7.1% to 6.3%
- We are nearing the 31st October deadline for BREXIT & outcome needs to be monitored. Global impact post exit needs to be seen
- We expect Q2 numbers to be better than the trend partly due to lower corporate tax rate & this should provide some support to the market. Autos, Metals & Mining should underperform
- Whether the festive season provides a boost to the flagging economy needs to be seen
Subdued GST collections, low IIP/GDP growth numbers & continuous FII outflows remain a concern. We expect the ongoing festive season to provide some boost to the flagging numbers. On the other hand steady mutual fund inflows, reasonable valuations & inflation trajectory remaining stable augurs well for the markets. Global factors beyond India such as US- China trade war, BREXIT impact & global slowdown remain a concern. We strongly advise investors to continue their SIPs in equity funds. If possible, one should increase the amount or number of SIP when negative returns are higher because when the market recovers, the return on accumulated corpus would be higher and one would end up accumulating higher corpus.
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Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 10 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata. He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’