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Market Review

OVERVIEW OF MARKET

Domestic markets continued to be driven by liquidity and global events. The focus, however, remained on the corporate earnings for quarter ending December 2016, which have been better than expectations. All the states have agreed to GST implementation from July 1, 2017. In longer-term GST holds potential to boost economic activity substantially, improving the government’s revenue by broadening tax base & tax compliance and help achieve better transmission of prices. On the international front, President Trump's first speech to the US Congress promised infrastructure spending, repealing Obamacare, alteration of immigration policy and lower taxes for the middle class and corporates.

India GDP growth for quarter ended December 2016 came at healthy rate of 7.0%, despite demonetization. The Index of Industrial Production (IIP) for the month of Dec 2016 contracted 0.38% as compared to expansion of 5.65% in Nov 2016. Consumer Price Index (CPI) decreased to 3.17% in Jan 2017 from 3.41% in Dec 2016.

In February 2017, Nifty gained 3.7%; IT, Oil & Gas and Banking sectors’ outperformed while Auto, Power and Metals underperformed the Nifty. FIIs were buyers for more than Rs 9,902 cr while domestic institutional buyers bought more than Rs 935 cr of equity during the month.

The Bond yields rose during the month of Feb 2017. The benchmark 10 year G-Sec (6.97% GOI 2026) closed 46bp higher at 6.87% against 6.41% last month.

Outlook

The RBI policy stance changed from accommodative to neutral and RBI commentary turned hawkish due to multiple global and domestic factors. The key global events to watch for are uncertainties surrounding the direction of US macro-economic policies along with polices of other central banks. High domestic inflation and expectation of end of accommodative monetary policies by global central banks is expected to keep interest rates high.

Outlook

Equity markets have rallied 15% in FYTD17. FII turned net buyers for the first time since September 2016 as flow of foreign investment returned to emerging markets. Rapid remonetization in the country and fall in bank interest rates are conducive for demand recovery and high financial savings thus helping equity markets in delivering superior returns in medium to long term.

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