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Market Review

​​​​​​​​​​​​​​​​​​​OVERVIEW OF MARKET

Nifty sharply gained 7% during the month to register a healthy 15% return for the financial year 2019. Contributors to positive market sentiment during the month were pre-election polls indicating the possibility of the incumbent government retaining power, potential rate cut by RBI in its upcoming policy, easing geopolitical tensions between India and Pakistan and optimism over US-China trade negotiations. Among the sectors, Banks, Energy and Infra outperformed while IT, Auto and FMCG underperformed the Nifty during the month. FIIs were net buyers to the tune of about Rs 329bn, while domestic mutual funds sold around Rs 72bn of equity during the month. The Index of Industrial Production growth stood at 1.7% in January compared to 2.4% in December. CPI inflation hardened to 2.6% in February against 2.1% in January. WPI inflation firmed to 2.9% in February as against 2.8% in January.

The Bond market rallied during the month of March 2019. The 10 year benchmark G-Sec (7.26% GOI 2029) closed 6 bps lower at 7.35% against 7.41% last month.

Outlook

Growth concerns expressed by key global central banks are positive for global fixed income market. Against this backdrop, steady currency, range bound crude, slowing growth and CPI print below the medium term mandated target of 4% are positives for the domestic fixed income market. RBI’s commitment towards providing adequate system liquidity is also supportive of the market sentiment. Market sentiment likely to get further boost from indication of further monetary easing by RBI amid slowing growth and lower inflation. However, over the medium term, Government’s commitment towards fiscal deficit target, crude price movement, progress of monsoon and FII flows could impact market sentiment.

Outlook​

Easing geo-political tensions and improving prospects of a stable government led to healthy foreign flows during the month. Future market direction would be led by upcoming quarterly earnings, management outlook for FY20, progress of monsoons and central election outcome. Recovery in credit growth, improvement in asset quality, softening commodity costs and appreciating rupee augurs well for corporate earnings. Strengthening banks balance sheet, consumer spending and expected capex post-election continue to remain key themes and in this backdrop, corporate banks and infra stocks offer a good means to build a core portfolio.​

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