The last two months namely has been quiet volatile for Indian economy with regards to all asset class. The problem started with plumbing of Rupee to Rs. 69 from 53-54 levels in May 2013. The depreciation which was long due for some time resulted in this sharp fall with the news of recovery of largest economy of world – America.
In Macro term CAD (Current Account Deficit), Fiscal Account Deficit rose up sharply. Industrial output data, unemployment data, inflationary pressure all added fuel to already subdued economy on exchange front.
From MICRO perspective, we saw free fall of Sensex by 10% (on positive note recovered 7%) and also Bond yield rose sharply by 10% - 20% across duration, but eventually settling down at meaningful level.
The panic was not only seen back at home but in all the developing, emerging & frontier economy as well. US Dollar was seen emerging stronger against currencies of all these economy.
The major culprit for all unfavorable scenarios was the announcement of US Federal to slow down austerity back home which signal the recovery of US economy. Eventually the FII’s started redeeming their investment from emerging markets & increasing the allocation in US Treasuries. As we were already struggling with existing CAD problem it further got multiplied.
With new RBI Governor in office and his initial initiative backed by govt. policies Rupee fall is seen arrested and confidence in Indian market seems to be returning with FII’s investment of 6000 cr (aprox) in equity market & more importantly in excess of 3500 cr. investment in Indian debt market.
We still maintain, debt segment of Mutual Fund is the best segment ever with interest rate settling down and Short Term Rate giving very good option of returns in excess of 10% & with indexation Tax Free returns of around nine percent.
