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Market Commentary

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Equity Market

Equity Commentary – April 2018

The Indian equity markets ended higher in the month of April 2018, as both Sensex and Nifty were up by 6.6% and 6.2% respectively. The broader market; the BSE Midcap & the BSE 200 both performed in line with the Sensex with a performance of 6.6% respectively. In terms of sectors; Auto, FMCG, Healthcare, IT, Metals and Realty were the major outperformers whilst Banking, Consumer Durable, Capital Goods, Oil & Gas and Power were the major underperformers. FIIs were net sellers in April, with net outflows to the tune of ~USD 846mn. Consequently, the net FII flows CYTD have been ~USD 1.4 bn. Net equity investments in April 2018 by domestic MFs in the market were ~USD 1.72 bn.

Index Name As on As on As on Return in %
30-Apr-18 28-Mar-18 28-Apr-17 1 Month 1 Year
Nifty 50 Index 10739 10114 9304 6.2 15.4
S&P BSE Sensex 35160 32969 29918 6.6 17.5
15963 14798 6.6 15.0
S&P BSE SMALL CAP 18402 16994 15373 8.3 19.7
S&P BSE 200 4724 4433 4083 6.6 15.7
S&P BSE AUTO 25834 24057 22782 7.4 13.4
S&P BSE Bankex 28652 27198 25325 5.3 13.1
S&P BSE Consumer Durable 22380 22262 15475 0.5 44.6
S&P BSE Capital Good 19543 18477 17866 5.8 9.4
S&P BSE FMCG 11306 10290 9412 9.9 20.1
S&P BSE Health Care 14154 13158 15019 7.6 -5.8
S&P BSE IT 13568 12101 9619 12.1 41.1
S&P BSE METAL 14277 13322 11303 7.2 26.3
S&P BSE Oil & Gas 14430 14614 14455 -1.3 -0.2
S&P BSE Power Index 2126 2126 2330 5.3 -3.9
S&P BSE Realty 2430 2230 1924 9.0 26.3

The Macro Picture

  March-18 February-18
WPI 2.5% 2.5%
CPI 4.3% 4.4%
Index of Industrial Production 7.1% (for February 2018) 7.5% (for January 2018)
Repo rate 6.0% (as on March 31, 2018) 6.0% (as on Feb 28, 2018)
Marginal Standing Facility Rate 6.25% (as on March 31, 2018) 6.25% (as on Feb 28, 2018)
Source: RBI, MOSPI


Index of Industrial Production (IIP) grew 7.1% YoY in February 2018 versus 7.4% in January 2018 driven by manufacturing sector (8.7% YoY) coupled with a higher off-take of capital goods and consumer durables. The mining sector de-grew marginally. Capital goods saw strong growth at 20% YoY along with infrastructure and construction segment.


India’s Wholesale Price Inflation (WPI) Index remained broadly unchanged at 2.5% YoY in March 2018 with primary articles inflation and manufactured products inflation coming in marginally lower and fuel and power inflation higher than the February numbers

Consumer Price Inflation (CPI) index eased marginally to 4.3% YoY in March 2018 from 4.4% YoY in February 2018 on sequential contraction in retail food prices.

Monetary Policy

In the minutes of the Monetary Policy meeting held in April the Reserve Bank of India (RBI) came out with a hawkish tone highlighting upside risks to inflation – this view was echoed by all the members. As per RBI, inflation upside risks could stem from higher oil prices, government’s stance on minimum support price policy, fiscal slippage and monsoon. The members seemed more comfortable with the recovery in growth and noted recovery getting broad based with signs of pick up in capex and capacity utilization.

Other macro developments

Trade deficit in March widened to ~USD 14bn higher than the monthly average of ~USD 13bn in FY18. Key observations are; non-oil exports growth has slowed to ~2% (vs. 10-11% growth in December 2017) owing to high base and some moderation in global trade; weakness persists in exports of labour - intensive sectors (gems/jewelry, fabrics, etc.) which contracted for the ninth straight month and FY18 trade deficit was USD 157bn, 44% higher YoY.

Market Outlook

Equity markets expanded in the month of April after consolidating in March driven by supportive trends across sectors in the ongoing earnings season.

In the near term, the market will keenly watch the outcome of the Karnataka State elections and impact of a weakening rupee.

Going forward it is expected that consumption would remain one of the key growth drivers. Urban consumption has been strong so far, driven by moderate inflation and interest rates. Rural consumption (driven by increasing food prices and revival in sectors such as construction) is also expected to see a gradual uptick, resulting in a broad based consumption growth.

Risk of significant FII outflows on account of a major global risk off event remains a concern. Crude oil prices and monthly GST collections would be key monitorables going forward.

In terms of our portfolio positioning, we continue to remain overweight on direct and indirect beneficiaries of government push on sectors like roads, railways and housing. We continue to remain overweight on private sector banks on account of their ability to gain market share and maintain relatively higher growth rates. We are also diversifying exposure to consumption plays across multiple themes.

Long-term structural drivers like demographic advantage, low household debt, limited penetration across different consumer categories, increased potential for financial savings and urbanization makes India a compelling equity story from medium to long term perspective.

We believe investors would be well advised to invest with medium to long term perspective and systematically increase exposure to Indian equity markets.

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