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Market Review

​​​​​OVERVIEW OF MARKET

After a sharp surge of 16% in this calender year, NIFTY fell 1% during June on concerns over GST preparedness of companies and government, RBI’s order for banks to make sizeable provisioning on specified accounts referred to National Company Law Tribunal and large farm loan waiver by the key agrarian states. Pharma, FMCG, and Metals sectors’ outperformed while Oil& Gas, IT and Auto underperformed the Nifty. FIIs were buyers for more than Rs 3,617 cr while domestic institutional buyers bought more than Rs 7,853 cr of equity during the month

The new Index of Industrial Production (IIP) series recorded a growth of 3.1% in April compared to 3.8% in March. CPI inflation slipped to a record low of about 2.2% in May compared to c.3% in April. Newly released WPI inflation growth fell to 2.2% in May from 3.85% in April.​

The Bond market rallied during the month of June 2017. The benchmark 10 year G-Sec (6.79% GOI 2027) closed 15bp lower at 6.51% against 6.66% last month.

Outlook

The minutes of RBI Monetary Policy Committee’s meeting indicated a cautious stance on inflation. Additionally, one of the members indicated for a pre-emptive 25bps rate hike in order to be able to achieve the inflation target of 4%. The bonds yields will continue to be dominated by liquidity situation, expectation of good monsoon and global events like fed policy.​

Outlook​

Further market direction would be led by results for Q1FY18, news flow related to the progress of monsoon and further policy actions by the government. Corporate results are expected to be clouded with uncertainty surrounding GST implementation. It is reasonable to expect some confusion in the near term but like many countries have witnessed in the past, India too is likely to overcome the near term surprises and headwinds associated with this major change in tax structure. Demand recovery and consumption led growth would help equity markets in delivering superior returns in medium to long term.

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