MARKET
UPDATE
• Economic growth:
Declining commodity prices, especially crude oil, bodes well for
India and will further help reduce the Current
Account
Deficit. We also believe that declining domestic inflation, deflationary
pressures globally and positive policy actions by the government will support
further rate cuts by the RBI.
• Earnings growth:
We believe earnings growth will average closer to 17-18% p.a.
for FY 2016 and FY2017. India’s ROEs seem to
have
bottomed out and we see a recovery from here on.
• Markets will
benefit: Pick up in corporate earnings growth, fall in interest rates and
expanding return on equity (ROE) for
corporate
India should be the key drivers in the medium to long term.
Fixed Income Market
Outlook
• RBI policy: We believe
that the RBI’s larger-than-expected rate cut is aimed at jump-starting economic
activities ahead of commencement of busy-season credit period. Based on that,
we expect the RBI to maintain a status quo on the Repo Rate till
March
31, 2016.
• Government bond
yields: We are constructive on government bond yields over the
medium-term and expect the yield curve to
gradually
steepen. We expect systemic liquidity to remain benign in the near-term.
Equity Market
Outlook
Eqy Markets
•
S&P BSE SENSEX had a positive month (up 1.9% in INR terms and 2.7% in USD
terms)
• Mid
caps underperformed large caps by 0.3% but small caps outperformed large caps
by 0.8% (both in INR terms)
Inflation
•
September CPI increased to 4.4% vs 3.7% in August, in line with expectations;
core CPI remained soft at around 4%
• This
increase can be attributed to uptick in prices of vegetables and pulses, and
waning base effect
• US
Federal Reserve kept rates unchanged citing weakness in exports and soft
inflation
•
People’s Bank of China cut 1 year lending rates to a record low of 4.35%, while
ECB announced that it
was
ready to expand stimulus and cut rates
Global Macro
•
August IIP numbers saw an encouraging pick-up at 6.4% vs 4.1% in July, hitting
a multi-year high
•
Manufacturing, electricity, mining, capital goods and consumer durables sectors
all displayed improvement in growth
Economic Growth
•
Fiscal deficit reached 68% of the annual target, lower than 82.6% achieved in
same period last year
•
Falling oil subsidy costs and curbs on spending helped rein in the deficit,
even as revenues from asset sales fell short of expectations
Fiscal Deficit
Submission:
BSE Sensex looks like
consolidating at current levels with 10% - 15% plus, minus. This consolidation
phase is expected to be seen in market till March 2016. Good time to
participate in the market in installments. Debt Market with further
interest rates cut has been investment heaven.
