EQUITY OUTLOOK AUGUST 2016
Nifty 50 - Last 5 years
Nifty 50 - Last 1 year
Nifty 50 - MTD
Returns for period more than one year are compounded annualized.
Quick take •
Equity market valuations are broadly reasonable.
We remain bullish on equities from a medium to long term perspective.
Investors are suggested to have their asset allocation plan based on one’s risk appetite and future goals in life.
Key highlights GLOBAL
Indian equity markets continued to move higher in July. The Nifty is up 24 percent from its lows in February. The market sentiment has turned bullish helped by renewed foreign flows, improvement in domestic growth prospects and progress in policy rollout. The exuberance has helped broaden market participation as mid-cap stocks have also rallied. The market is also witnessing a big IPO pipeline after many years. Both retail and institutional participation in recent IPOs has been really strong and will help more companies come to the market. Global equity markets rallied sharply in July as they looked past the immediate impact of the Brexit vote that had led to a correction towards the end of June. As global growth remains soft and on the back of the new uncertainty from the British vote, it is likely that the developed market central banks will retain the bias towards easy monetary policy. Commodities market on the other hand have paused from their first half rally. Crude saw a sharp slide as global inventories for crude and downstream products continue to build up and also as some supply disruptions have normalized.
Monsoon season has started in earnest in June. July saw above normal rainfall which helped the khari season sowing to get underway. A good monsoon season which leads to a good harvest should help boost rural incomes and consequently consumption. High frequency economic growth data have remained volatile – a sign of a mixed economy where some sectors are on the upswing while others remain challenged. It is also reflected in the fact that consumer sectors are generally performing better than the investment sectors. The data continue to indicate that a gradual (but uneven) cyclical recovery is underway that should push GDP growth higher over the next year. Inflation has edged up in the past few months although it remains within the broad target range of RBI. The announcement on the appointment of the new RBI Governor is expected shortly. Bond yields have come off sharply in the past few weeks in anticipation of a more dovish choice. However the actual direction of policy will only be known over the next few months.
Government has continued to push on reform measures. The GST discussions are reaching a crucial juncture with most of the political parties and state chief ministers indicating their support. Passing the bill is a big test of the governent’s execution capability. The implementation of 7th Central Pay Commission (CPC) recommendations is expected to provide a big boost to urban discretionary consumption in the coming months. Jun quarter earnings season is underway and while broad numbers are patchy, quality consumer and financial companies have reported strong profit growth. Infrastructure and commodity sectors continue to remain challenged. Over the medium term earnings should start reflecting the improvement in the growth environment and has the potential to run ahead of nominal economic growth as the cycle strengthens.
Top 10 Stocks (By Holding)
AXIS EQUITY FUND • • • • •
The fund focuses on delivering superior risk adjusted returns. The fund manager targets out-performance to the benchmark while delivering risk that is lower than the benchmark. Stocks are selected in the portfolio based on their ability to grow earnings on a sustainable b