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Market Review

​​​​​​​​​​​​​​​​​​​​OVERVIEW OF MARKET

Nifty fell by 5.7% during the month due to FII outflows on back of proposal of higher taxes on non-corporate FPI’s, subdued corporate earnings for the quarter and lowering of India growth outlook by IMF. Among the sectors, Pharma, FMCG and IT outperformed while Auto, Metals and Energy underperformed the Nifty during the month. FIIs turned net sellers to the tune of about Rs 114bn, while domestic mutual funds bought Rs 104bn of equity during the month.

The Index of Industrial Production reported a growth of 3.1% in May compared to a growth of 4.3% in April. CPI inflation broadly remained stable at 3.2% in June. WPI inflation moderated to 2.0% in June as against 2.5% in May.

The Bond market rallied during the month of July 2019. The 10 year benchmark G-Sec (7.26% GOI 2029) closed 47 bps lower at 6.41% against 6.88% last month.

Outlook

Contained headline inflation and slower growth is positive for fixed income market. Growth Inflation dynamics may prompt RBI to continue with its monetary easing in the current financial year. Slowing Global growth resulted fresh round of policy rate cuts by key Central Banks. This will also help softer interest rate environment across the globe. Hence, in the near term, apart from currency depreciation all other factors are favourable for further downward movement in interest rates. However, over the medium term, Government’s borrowing, crude price movement, progress of monsoon and FII flows are key factors to watch.

Outlook​

Global growth concerns coupled with downward pressure on US and global yields is likely to provide fresh opportunities in emerging markets such as India. As public capital expenditure would remain the key driver for the economy, private capex would benefit from the ongoing lower interest rates cycle. In the near-term markets would be influenced by corporate earnings (mixed bag so far), progress of monsoons and further govt reforms. In this backdrop, our themes of retail/corporate banks and infrastructure remain intact and we believe that they continue to offer a goods means to build a core portfolio. Further, given the broad-based market correction, companies are available at reasonable valuations and we are constantly exploring quality businesses with supportive cash flows.​​

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