FROM THE CEO’s DESK
Dear Investors, “More money has been lost trying to anticipate and protect from corrections than actually in them.” Peter Lynch. The BSE Sensex had the best quarter since June 2009 and had risen more than 35 percent from lows in March, despite Covid-19 lockdown having seriously hampered economic activity. Backed by better-than - expected economic data in recent months, along with a proactive government stance and central bank policy intervention coupled with the resurgence of FPI flows into the domestic equity market, indicates towards a "V-shaped" recovery. Corrections in the equity market offer incentives for buying quality stocks at lower valuations. Instead of worrying, we expect this downturn and the year 2020 from an investment opportunity perspective as the risk-reward ratio in the current scenario is in favour of equity investments. In regards to the domestic market, while we expect second half of FY21 to see a turnaround in production, difficulties may emerge in Q1/Q2 of FY21 because of inventory disruption and the lockdown. Bold reforms in areas like land, labour, system liquidity, enhancing business-friendliness and formalizing the economy would help to re-create a “self-reliant India". The announcement of the Rupees 21trillion Covid-19 package will go a long way to help India come out of the slowdown and foster economic growth. Emergence of robust rural demand (good khariff crops harvest and forecasted above normal monsoon); a fall in the international crude prices thus relieving pressure on the CAD, rupee and inflation; a low interest rate scenario will increase the ROCE for the corporate, all of which will act as a tailwinds for the domestic equity market. We are positive on private banks, healthcare, telecom and utilities space while remaining neutral in IT and FMCG. On the equity market front, we remain optimistic and encourage investors to use any corrections, as a buying opportunity. On the domestic debt markets front, range bound movements in the benchmark yield curve is foreseen in near term, with a gradual shift downwards, though slight uptick of yield in near term due to rise in fiscal deficit pressure (post announcement of 21tn rupees Covid-19 package ), FII/FPI selling in the debt category and Moody’s downgrade of sovereign ratings for India, cannot be 4 ignored. Measures like TLTRO, LTRO and expectations that RBI may come up with OMOs for G-Secs and SDLs will bode well in reduction of the elevated spreads and limit the spike in yields. In the recent correction, mid & small caps had taken a beating too. We expect mean reversal in the course of CY20 which will allow mid & small caps to catch up on their last two years of under performance vis-à - vis the Nifty-50 index. We urge investors who are interested in mid- and small-cap space to look for companies with strong prospects for earnings growth and with reasonable valuations at beaten-down rates. Attractive equity market valuations reinforce our view of equity overweight with a bias towards large-cap stocks and selective multi-cap mutual funds and PMS (Portfolio Management Services) We suggest 65 percent for Large Cap, 25 percent for Midcap, 10 percent for Small Cap as part of the equity-sub asset class allocation. On the debt side, we remain overweight on conservative strategies and reiterate our focus on risk adjusted return on portfolios of fixed income. It is suggested that investors buy quality AAA corporate bond funds , Banking & PSU debt funds while maintaining 5 percent -7 percent as a gold-allocated volatility hedge.
No comments:
Post a Comment