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…