EQUITY OUTLOOK MAY 2016
Nifty 50 - Last 5 years
Nifty 50 - Last 1 year
Nifty 50 - MTD
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 equities have risen, in line with global markets over the last 2 months. This period has seen heavy FII inflow into the equity markets. Global markets rally has also lifted commodities prices over this period. The US Fed has surprised with its dovish tone over the last couple of months. In its latest statement in April, it hinted at a possible next rate hike in June. At the same time, central banks in Japan and Europe have refrained from adding to their easing measures further. Dollar has lost ground against major currency partners in this period. Chinese economy has shown signs of rebound in activity after a fresh burst of lending by the banking system.
India’s relative macro outperformance continues in a difficult global environment. The recent macro and high frequency data indicate a gradual cyclical recovery is underway that should push GDP growth higher over the next year. Improvement in data was witnessed in the Industrial production and PMI (both manufacturing and services) releases. Going forward, impact of pay commission awards should help urban discretionary consumption. Likewise hopes of ‘normal’ monsoon bode well for rural demand. Inflation trajectory remains within the RBI’s comfort zone, and further cushion on inflation should come as food inflation moderates and on pass through of weak global commodity prices. While further policy rate cuts are likely limited, better transmission and changed liquidity stance, should lead to lower rates over the next 12 months.
While the government has focused on reforms through executive decisions, the first half of the budget session saw some success in passing reform legislation. Going forward, bankruptcy code and GST remain key agenda items. While the latest earning season numbers are mixed, over the medium term earnings should start reflecting the improvement in the growth environment.
AXIS EQUITY FUND • • • • •
Top 10 Stocks (By Holding)
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 basis from a medium term perspective while maintaining a highly liquid and risk managed portfolio. While the approach of the fund manager is towards having a stable portfolio over the medium term, the fund manager makes adjustments as needed as it looks at the evolving cycle and prospects for corporate earnings. As the economy shows steady improvement, the fund manager has constructed the portfolio with companies that should be able to take advantage of this cyclical improvement to grow topline and earnings. Within the overall sector and market cap limits, the fund remains balanced in its allocation between mid-cap and large-cap stocks and should benefit from the expected improvement in the economy over the next 2-3 years.
Top 5 Sectors 32.0% 14.4%
HDFC Bank Limited
Larsen & Toubro Limited
Zee Entertainment Enterprises Limited 4.9 Tata Motors Limited
Kotak Mahindra Bank Limited
Sun Pharmaceuticals Industries Ltd.