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Market Review

​​​​​​​​​​​​​​​​​​​OVERVIEW OF MARKET

Nifty was higher by 1.5% during the month as the NDA received a clear mandate from the electorate. Even as crude prices declined 11%, global markets remained weak during the month as US and China are unable to resolve their trade dispute. Among the sectors, Banks and Infra outperformed while Pharma, Metals and IT underperformed the Nifty during the month. FIIs were net buyers to the tune of about Rs 88bn, while domestic mutual funds bought Rs 50bn of equity during the month.

The Index of Industrial Production reported a degrowth of 0.1% in March compared to a growth of 0.1% in February. CPI inflation remained stable at 2.9% in April while WPI inflation also followed similar trend.

The Bond market rallied during the month of May 2019. The 10 year benchmark G-Sec (7.26% GOI 2029) closed 38 bps lower at 7.03% against 7.41% last month

Outlook

Contained headline inflation and slower growth is positive for fixed income market. It will not only help RBI to infuse necessary durable system liquidity but also opens up the possibility of further rate cuts. Global growth inflation dynamics also prompted other key central banks to maintain their growth supportive stance. All these factors are favourable for the domestic fixed income market. Hence, in the near term interest rate movement is likely to be range bound with softer bias. However, over the medium term, Government’s commitment towards fiscal deficit target, crude price movement, progress of monsoon and FII flows are likely to impact the market sentiment.

Outlook​

Positive fund inflows from FII’s & DII’s during the month of May was the result of abating political and policy uncertainty at the centre. During its second term, the government’s immediate priority would be to revive economic growth. Calibrated reforms, infrastructure creation along with fiscal consolidation and rural growth are further likely to be the areas of focus. In this backdrop, our themes of banks’ balance sheet strengthening and infrastructure pickup remain intact. Corporate earnings for Q4FY19 were mixed but the outlook for FY20 remains optimistic. Market will take further cues from update on the monsoons, impending union budget and expected upcoming reforms.​

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