Market Outlook for Q2 2019

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  • Positive outlook on mid and small cap funds as value buying opportunity exists. We expect mid and small caps doing better than large caps in next 1-2 years.
  • Actively tracking your portfolio and rebalancing will be done by reducing over valued category and taking positions into under valued segments.
  • Long term view is positive for India as new government is taking many initiatives to make India as $5.00 trillion economy by 2025.

Equity Market Outlook

  • Many are skeptical about US growth but we believe low inflation and steady expansion along with lower interest rates will have significantly less volatility in the market compared to 2018.
  • Our positive outlook is based on declining interest rate, stable commodity prices, improved asset quality and pick up in credit growth which is having direct impact on PAT specially in Financials, IT, Power, FMCG and Chemicals.

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Performance of Nifty is skewed towards top 5 companies because of higher weightage and majority are under performed.

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  • Credit growth pick-up and lower interest rates will push demand which is subdued from last 1-2 years and having direct impact on improving earnings.
  • Since last one year, Mid & Small caps have under performed large cap. Improved credit availability, easy liquidity, attractive valuations going to lead the mid and small cap returns in 2019-20 compared to large cap returns which are already trading at expensive 29.50 PE multiples.

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Fixed Income Market Outlook

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  • The monetary policy committee of the RBI cut the policy repo rate by 25 bps from 6.00% to 5.75%. They also changed the policy stance from “Neutral” to “Accommodative”; thus keeping the door open for further reduction in the repo rate.
  • The RBI expects GDP to grow by 7.0% in 2019-20 against the earlier projection of 7.2%. With this forecast the MPC may not need to cut the Repo rate by a large amount to revive growth back up to potential.
  • CPI inflation outlook for the first half of fiscal 2019-20 expected to be a range of 3 percent to 4.5 percent.

Average Yield across Diff Credit Rated Securities

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  • Higher crude price to weigh on domestic crude price
  • The yield of 10 year benchmark i.e. 7.26% for 2029 paper is trading at 6.90% at present.
  • Time for Gilt, mid and long duration investment is nearing to end as interest rate down cycle is reaching its last leg.
  • Short term, banking debt and Money market funds are expected to do well in short to mid term time frame.
  • Since many credit defaults are started taking place in last 1 year with IIFL and DHLF issues, there might be some more in pipeline which affects the debt returns. Chasing safety on return is priority at this time.