Financial Planning

Market Outlook- June 2021

Warren Buffett once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful”.  Current market is an absolute reminder of the above quote.

Sensex & Nifty have touched record highs and still going strong. Globally, mobility and economic indicators are showing a recovery. Strong growth, loose policy, and excess liquidity are boosting global equity markets to all-time highs. India has also crossed the milestone of $3 trillion market capitalization. Due to the impact of Covid in the April-June quarter, India’s FY22 real GDP growth estimates are being downgraded by 2.0%-2.5%. However, the 2nd Covid wave has peaked out (more or less) and the pace of vaccinations is rising with improved supply. So, India’s economic recovery should come back on track by FY23.

FIIs have been net sellers in June but expected to come back strongly in 2nd half of this year. Till then strong domestic flows and increased retail participation should support markets. Any correction should be temporary and minor. However, short-term upside may be limited, and the market are likely to remain range-bound.

Strong numbers from Large Cap Stocks have justified their valuations and hence their allocations have been increased this month. Mid-Caps have also been catching up fast. Small Caps are in high-risk zone and hence allocations for that segment is not recommended at present.

Since RBI will not further decrease rates and inflation is expected to rise, most likely the interest rates may go up in the future. Hence Debt funds may also need allocation change, from PSU & Banking to Floater or low duration funds.

Considering current & future scenarios, equity to debt portfolio allocation needs further restructuring and should be in sync with the changing market dynamics. It is advised to be in touch with your advisors towards same. Happy Investing!

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Market Outlook – May 2021

For the month of April, domestic equity markets rose on the back of brisk buying in the banking and finance segments. Upbeat earning numbers for the quarter ended Mar 2021 boosted the market sentiments, after a major private sector bank reported strong earning numbers. Positive global cues further added to the gains, after the U.S. Federal Reserve kept interest rates unchanged in its monetary policy review and re-affirmed its accommodative policy to support the economic recovery.

However, profit booking capped the gains to some extent. The overall market sentiment also remained muted as a devastating second wave of the COVID-19 pandemic showed no signs of abating with the country continuously reporting a record surge in daily infections.

Markets to remain sideways this month with Nifty range of 14200 – 15200. State elections are done and dusted, hence Govts full focus will now be on COVID control. Vaccinations above 18 age have started and if States are able to conduct this drive successfully, the market is going to touch new highs in coming months. 

Recommended to start accumulating stocks. Pharma, IT, Cement & Chemicals, as being quick runner segments. We suggested building equity allocation on a partial basis monthly, to accumulate or shift debt assets towards equity. Speak to your advisors for a guided experience.

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Market Outlook – April 2021

Equity Market

Markets remained sideways in the month of March-2021. Nifty remained range bound in the range of 14500-15000. The two key risks for equity markets in an intensified second wave of Covid and continued surge in global yields have materialized together over the past few weeks. This expectedly caused turbulence for stocks as the Sensex and the Nifty corrected nearly 7% and 6.5% respectively from recent highs before mounting some recovery.

While the second wave continues to be a cause of worry, it has not led to any major curb in activity so far as lockdowns have been very localised and much less stringent. With the understandable reluctance to lock down on the part of authorities, better preparedness on medical infrastructure and continued pick up in the pace of vaccination, the economy can still manage to stay largely unscathed this time barring some impact on the services sector.

The week gone by also saw US president Biden pushing through on his election agenda of a redistributive fiscal policy. He proposed a $2 trillion infrastructure plan that should help create jobs and proposes to partly finance it through an increase in corporate taxes. He is also expected to announce a somewhat similar magnitude in part 2 of his plan focussed on ‘human infrastructure’ which is expected to be financed through higher personal taxes. With a slim majority in the Senate for democrats, the extent to which these proposals will see the light of the day is uncertain as of now. But directionally these proposals continue to strengthen the prospects of a global reflation, and that should be a tailwind for emerging market equities including India.

Investors will also await the start of the March quarter earnings seasons from this week as they expect another quarter of bumper bottom line growth. Here too commentary from management on the 2nd wave will be keenly watched.

With profit booking in the previous months, one can look at allocating funds gradually now, towards building equity in mutual funds, as well as stock portfolios. Speak to your advisors on your portfolio building.

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Market Outlook – March 2021

Markets took a pause in February, after touching record high, post budget. Domestic equities ended in the negative territory. S&P BSE Sensex and Nifty 50 fell, 3.5% and 3%, respectively.

Concerns about the recent spike in the number of Covid-19 cases back home and weak global cues, including rising global bond yields, especially in the US, dented the market sentiment. However, further losses were restrained on optimism that vaccine rollouts across various parts of the world will allow a swift global economic recovery. Finance Minister Nirmala Sitharaman’s announcement that the government has lifted the embargo on grant of government business to private banks induced further buying by investors.

India’s Gross Domestic Product (GDP) for the October-December 2020 quarter grew by 0.4%, while the GDP for the entire financial year 2020-21 (FY21) is seen contracting 8%. India’s fiscal deficit widened to Rs 12.3 lakh crore in January, representing 66.8% of the target as per the revised estimates (RE) for FY21. India’s core sector growth came in at 0.1% in January against 0.2% expansion recorded in December.

The Cabinet approved the production-linked incentive (PLI) scheme worth Rs 15,000 crore and Rs 7,325 crore for the pharmaceutical and technology hardware sectors, respectively, to encourage domestic manufacturing.

Crude oil prices rose sharply, due to a drop in crude output after a deep freeze in Texas disrupted production last week.

As mentioned in the February market outlook we have advised 50% profit booking in equity and suggested shifting the same to Debt. We expect further corrections this month, which may allow one to re-enter or shift Debt gradually back to Equity. We also recommend (to start) building an equity stocks portfolio, in a gradual manner, buying on every dip.

Happy Hunting!!!

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Market Outlook – Feb 2021

January 2021 was a month of record highs. Sensex scaled 50K for the first time, and Nifty50 at a kissing distance to touch 15K. Budget 2021 got a big thumbs-up from the stock market, with Sensex jumping record 5% up, on a single trading day.

The Union Budget was tilted more in support of the Growth, even at the cost of higher borrowing. Government increased focus on infrastructure and no Tax rate hikes (as expected) cheered the market. The Budget is aimed at supporting employment and businesses by spending, rather than worrying about near-term fiscal position. Economic environment is becoming more conducive for a business cycle recovery. We continue to remain positive on sectors which are closely linked to the economy like Banks, Capital Goods, Infrastructure, Metals/Mining etc.

We believe the current market rally may continue till the below mentioned triggers play out: a) US acknowledging inflation & in conclusion pausing stimulus, b) US Treasury Yields reaching 2%, & c) Crude Oil touching 60-65$/bbl, which may lead to high inflation.

By Historical standards, Indian markets are highly overvalued. The ratio of Sensex share prices to company earnings is now over 34, against under 20 historically. China’s ratio today is just 17.5%. Sensex is bloated by global flood of central bank money. The flood will ebb one day.

It’s recommended to book profits and park the same in Debt funds. Idea of this parking is to bring a cushion to this liquidity driven market, which will taper at some time. Even if these cues do not sustain, one can look at moving back to equities, at an appropriate opportunity.

Also, what is highly recommended, is not to be a Robinhood in these markets, but keep in touch with your trusted advisor and his/ her guidance 😉.

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BUDGET 2021 – what is there for me?

Budget 2021 will be remembered for many years to come, as the market went into full gear and ended with a gain of almost 5% in a single day. Wow!

What appealed to the market was the fact that there was no negative news, like Covid19 tax, Wealth Tax, LTCG changes and many other news, which was floating around before the budget. And the biggest contributor was the Government spending on account of Covid19, leading to big borrowing and fiscal deficit hitting 9.5% (Good, as well as Bad).

Coming to the point, what is there for ME? Good or Bad 😉

Tax Filing – Tax filing will become simpler for us further, as other than salary, bank, tax/ TDS details, which is available/ pre-filled, we will now have prefilled details on capital gain from listed securities, mutual funds, dividend income etc. Very good for us.

Dividend Income – Taxpayers are not required to estimate their dividend income for advance tax payment. Tax to be paid only when dividend is declared or paid by the company. Good for HNI.

Senior Citizen Tax File – Senior citizens, aged 75 or upward, need not file Tax returns, if income consists of Pension & Bank Interest (same bank linked to Pension). Good for senior citizens. Very Good.

NRI investments – Rules will be decided on the income earned from overseas retirement funds, opened by an NRI while working outside India, to avoid double taxation and other issues. Good for NRI.

EPF contribution – Interest on employees’ share of contribution to EPF, will be taxable at the stage of withdrawal, if it exceeds 2.5lacs in any year, on or after April 1st, 2021. This will be negative for affluent/ HNI’s, who contribute higher to their salary.

ULIP – Proceeds from ULIP issued on/ after 1st Feb 2021, will be taxed for capital gain, if the amount of premium exceeds 2.5lacs in any year. Again, negative for affluents/ HNI’s.

There are more to above/ Budget points, therefore we suggest you speak to your Advisor on the fine prints, its applicability & understanding.

Happy Budgeting!

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Market Outlook – January 2021

Stock Markets across the world bounced back from the steep drop in March. The Tech heavy Nasdaq gave a whopping 42% gains, wider index S&P 500 gained 15%, and the story is quite similar in India, with Nifty gaining almost 15%.

The year 2020 was an extreme year in all sense, the entire global markets were tested at extreme levels, the volatility across the asset classes, including Equity, Commodity and Forex were extreme and smart investors managed to scoop-in gains by actively managing their portfolios.

We are entering 2021 with the market at its peak valuations, factoring the improving economy and the next fiscal year expected to be better. FII’s are continuing to pump the money in emerging markets like India, which also explains the one-sided rally, which we are witnessing currently. The next rally in the market is crucially dependent on many forthcoming events.

In the coming month, the US will be governed by the new President, there will be some structural reforms expected, and the budget will all lead to market swings. All eyes will be on the Bank Q3 financial results, since this will be the first quarter, post moratorium and analysts will keep an eye on NPA and provisioning numbers. India’s Financial budget is due in Feb’21 along with interest rates announcement and GDP data. Speculation activity and volatility is expected to be on the higher side due to these events lined up.

The above news is expected to decide the fate of the market in the coming months; hence Investors are advised to start booking the profits and rebalance their portfolio accordingly.

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Market Outlook – December 2020

$8.8 Billion USD (or INR 64k Crores), that is the kind of money brought in by the FII’s (Foreign institutional investors) in November-2020, catapulting the stock markets to a new high, and making the month with the “highest monthly net-inflow” (ever till date). The Mid and Small-cap sector were the outperformers to Large-cap, as the Large-cap sector seems to be at saturation with the top giants (like Reliance, TCS, Infosys & HDFC twins).

If one looks at the market valuations from the earnings perspective, it will appear to be expensive, since the profitability of the company has been affected the most, due to the unprecedented times. Though we all know that this is a temporary phase and recovery may be better than expected, but other ratios like Market-cap to GDP, it is above average, where GDP is expected to be in the negative territory for the current financial year.

We believe, and based on the historical trends, the market is nearing to test its saturation level, and the rally would only be sustained if FII’s keeps pumping funds. Recently MSCI has increased the weightage of emerging markets like India in their index and hence all the passive fund’s flow is getting diverted towards the Indian market.

The GDP for Q2, for the current fiscal year, improved better than expected and contracted by -7.5% (market expectation was in the range of -9 to -11%). Nomura & CARE has revised expectations for the current fiscal year based on the new trend line, with a forecast of -8.2% & -7.7%.

Considering all these factors, one should relook at their portfolios and rework on future allocation.

Happy Investing!!!

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Financial Advisor – Who to choose?

When we search for an Investment Advisor or a Firm, we have too many names that pops-out, and each one of them highlighting … either an Ivy league degree (they have), or Assets they manage, or How big the firm is?

Also, we have the smart marketing Ads & Campaigns, which are too enticing, either making us believe that Investments is a kid play, or the kind of returns one can generate … super easy 😉.

Plus, the world we live in today has too much information overload, how to filter it down, who to believe, and finally who to choose?

Two simple questions to shortlist an advisor or a firm.

Sounds unbelievable, but it is that simple.

Who talks the most in the first meeting (or the call)? … in the first or the initial set of meetings, or the Tele-call, usually it is you who will be talking the most, and your advisor will ask basic questions (to drill down your requirements), and there will be no products offered at this stage. If it is the other way round, then you are in the wrong hands.

It is like a doctor’s appointment, where post listening to you, asking basic questions & checking your reports, finally the doctor writes a prescription.

How do they make money? … although this is the most awkward question to ask, but when it comes to your hard-earned money, you better ask and most importantly, how it is answered. If they are not comfortable answering this, or try confusing ways, then you are in the wrong hands.

Disclosure, conflict of interest, earning modes, risk factors etc … cannot be part of the agreement only (the fine print), but needs to be spoken first and to be highlighted at the start.

Trust builds up… only If your Advisor is transparent with you, and that too, speaks simple language, right from the beginning.

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Markets at a New High – Sensex at 44K levels

Keeping aside the Corona & Lockdown fear, our economy & the stock markets are upbeat on the future and the surge continues. Some of the indicators from today’s Economic Times, to Cheer us up 😉.

Business recovery at a New High: The Nomura India Business resumption index (NIBRI) touched 87.1 for the last week, against 84.4 the previous week.

Car industry on a High Gear: Maruti being the market leader, has revised its annual production target recently, based on demand & long order book in hand. Earlier it was expecting a 20% decline, with analysts predicting 13-14%, which they have revised it to 5-8% now. Other manufacturers like Hyundai, M&M & Tata, all are all sitting on a strong order book & demand, thereby helping the passenger vehicle industry to an early revival.

IPO Market warms up: Come December, and we have half a dozen companies eyeing for raising funds through IPO. So far in 2020, 12 companies have raised funds through IPO, with the majority of them yielding handsome returns.

Companies likely to raise (IPO) in Dec: Kalyan Jewellers – 1750crs, Suryoday Small Fin Bank – 1000crs, ESAF Small Finance Bank – 1000crs, Nazara Technologies – 950crs, Burger King – 900crs, RailTel – 700crs, & Antony Waste Management – 350crs.

Photo Credit: Economics Times