Financial Market @ October 2017

The market continues to swing from end to end, in a way is consolidating at its peaks but remains steady. At one end the growth moderation has caused some concerns. But at the other end is the uptick in the industrial production as marked by IIP. In July, IIP grew by 1.2% yoy against -0.1% in June. In Aug-17, exports picked up by 10% over the last year. Trade growth needs to be sustainable.

Structural reforms have come in. The push for transparency in capital management, tax compliance and general corporate governance may stimulate entrepreneurship. This is likely to result in sustainable long term growth over a period of time. Though much is needed to be done on the policy front. The initial teething troubles howsoever temporary have an economic cost. Simplification and ease of doing business are the hallmarks of GST; and that principle must be ensured.

The monetary policy stance continued to remain unchanged for October 17. Inflation concerns are clearing dominant in central banker’s risk matrix. Growth may now increasingly be dependent on the swift resolution of the stressed banking assets; and the resumption of the banking credit to the commercial-sector.

In the phase of consolidation fresh investments in equity segment have to wait for 2 to 3 year of time horizon to see meaningful gains. Debt fund should continue deliver better post tax returns over three year of holding.

(With inputs from Mr. Nilesh Shah – Kotak Mutual Fund)

Financial market Update @ September 2017

 With GST being reality – all eyes on Inflation…

During FY09-FY14, India clocked near double digit consumer price inflation, leading it to being eventually termed as a ‘fragile five’ economy in 2013. This eventually led government to rein in fiscal profligacy, restrain the MSP rise and adopt a more efficient approach in food-supply management. The RBI, too, embarked on a more explicit inflation targeting regime. With fortune favouring the bold, global commodity prices turned course and collapsed meaningfully since 2014 and continues to stay relatively low. All this aided the dis-inflationary wave starting as early as mid-2014. Presently, India CPI inflation is tracking below RBI’s central target of 4%. While we do not expect such benign inflation to continue for long, neither do we see inflation breaching the central bank’s tolerance limit in foreseeable future. Inflation is likely to average at 3.4% in FY18 and 4.2% FY19 leaving scope for further easing unless private investment climate improves dramatically. Other risks to further monetary easing is sharp global commodity inflation, impending normalization of the balance-sheet by US Fed and Indian central government supporting growth over fiscal consolidation.

We don’t see equity market making headlines for not so good reasons. Corrections & Consolidations would be the terminology mostly used to define the status quo. Well certainly the surge there-after is going to be remarkable (which should surface only after discounting the GST led Inflationary pressure in some nine to twelve month. Diwali next year should be the trigger point. Unless and until the prevailing liquidity in the system doesn’t  expedite the run … keeping aside the key economic factors.

Good time to amass units of good diversified multi-cap funds from here.

The Bull Run is here to stay for some good years before it reacts to the unfolding of Global Financial Uncertainties.’

Debt Fund returns should be range bound with steady returns as per the duration of the scheme. The Debt Fund returns are safe & better than any Bank Fixed Deposit on three year time horizon with Taxation benefits. (Cumulative returns of more than 3 years are treated as Capital Gains and after indexation the entire returns works out to be Tax Free)

The inputs on Inflation is factored from SBI Mutual Fund analysis…