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Market Review

​​​​​OVERVIEW OF MARKET

During the month, equity markets declined due to heightened geopolitical tensions between North Korea and United States and are still recovering from its effects. On the domestic front, as part of efforts to curb black money, SEBI imposed trading restrictions on 331 suspected shell companies. Oil & Gas, Metals and FMCG sectors’ outperformed while Pharma, IT and Capital Goods underperformed the Nifty. FIIs were sellers for approximately Rs 12,770 cr which was fully absorbed by domestic mututal funds who bought around Rs 17,220 cr of equity during the month.

GDP grew 5.7% for Q1FY18 against 6.1% in the previous quarter, its slowest pace in more than 3 years. The Index of Industrial Production came in at -0.1% in June compared to 2.8% in May. CPI inflation accelerated to 2.4% in July compared to 1.5% in June. WPI inflation inched sharply higher to 1.9% in July from 0.9% in June.​

The Bond market yields rose during the month of August 2017. The benchmark 10 year G-Sec (6.79% GOI 2027) closed 6bp higher at 6.53% against 6.47% last month.

Outlook

Continued fiscal consolidation by reducing government deficits and an anti-inflationary monetary policy stance have helped cement the macroeconomic stability. The bond yields should continue to be dominated by overall liquidity situation and growth-inflation dynamics. In the near term, however, the debt markets would keep a close watch on the GST collection, inflation trajectory and the global geopolitical secenrio (which may impact the strong FII flows seen so far).​

Outlook​

The broad narrative is for growth to pick-up led by restocking in the near-term and then by consumption led by normal monsoons. Discretionary consumption continues to remain robust. The activity in real estate and construction segments is expected to remain weak pushing back the investment demand. Besides a slow pick-up in investments cycle, rupee appreciation is a drag. Given the high earnings growth expectation, the market trades at reasonable valuations at current prices. On domestic front liquidity (in short-term) and corporate earnings (in medium term) will continue to determine the market direction. While there is a reason to be optimistic about Indian economy, there might be volatality due to global developments .

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