FROM THE CEO’s DESK
Dear Investors, “We simply
attempt to be fearful when others are greedy and to be greedy only when others
are fearful”- Warren Buffet. The Covid19 curve is flattening globally. The
central banks and governments around the world came out with a slew of monetary
and fiscal measures, which ensured that stress on credit markets was swiftly
arrested and credit spreads stabilized. As the global economy progressively
opens up, there is a increasing evidence of business activity picking up and
step by step moving in the direction of normalisation. Partial resumption of
financial activities globally had already casted its mirrored image on equity
markets. Global equity is staging a "V"-shaped recovery, whilst
domestic equity indices are trading above March lows by approximately 33
percent. Corrections in equity market throws possibilities to buy quality
stocks at cheaper valuations. We foresee this correction and the year 2020 from
an investment opportunity perspective, in place of worry, as the risk – reward
ratio in current scenario is favourable for equity investments. On the domestic
front, the GOIs announcement of ~Rs 20 lakh crore stimulus package, represents
around 10 percent of Indian GDP. Focus being on small business tax cuts as
well as domestic manufacturing incentives and support to rural economy, which
will pave a stronger foundation for the Indian economy going ahead. In an
effort to support the ailing economy from the negative impact of the Covid-19
pandemic, the RBI on 22nd May announced a series of measures, along with a cut
in repo and reverse rate by 40bps to 4% and 3.35%. In a span of just 2 months
MPC had now reduced the policy rate by 115 bps. The advancing of its MPC meet
and the additional measures in shape of liquidity expansion, support to exports
and imports and continuation of accommodative stance displays RBIs agility and
readiness to mitigate the negative effect of COVID-19 along with focus on
growth. We expect the impact of earnings slowdown and economic downturn to be
largely priced in, while the impact of strong policy stimulus is gradually
emerging. Going forward, we foresee emergence of robust rural demand, lower
CAD, stable rupee, subdued inflation print and lower interest rate scenario,
which may act as tailwinds for the domestic equity market.
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