Mid & Small-cap completely dominated the Large-cap in the previous month, where the Large-cap index gave a return of -1.25%, while the Mid & Small-cap gave a return of 3.30% and 7.72% respectively. This spurt was anticipated in advance, hence the allocation towards Mid & Small-cap was suggested, as compared to the previous month.
The large-cap index was dominated by selling pressure from the FII, due to global cues of US-Iran war and Coronavirus mainly, which overshadowed the pre-budget rally (on hopes).
For the month of February, one can expect the market to remain volatile, as GDP data, RBI policy, Quarterly results, and the greater impact of Coronavirus on Asian & global market, will give mixed cues to the Indian market.
In the Budget, the government has increased customs duty on imported items, to promote ‘Make in India’ initiative, parallelly they have also reduced corporate tax to 15%, for newly set-up manufacturing units. The impact of this initiative will be seen in the long-term. But for the short-term, the new tax regime will discourage certain class of tax-payers to invest in tax-savings instruments and will leave more money in their hands (to spend), which will boost the consumption (which is actually the need of the hour).
Due to significant fall seen on the day of Budget, one can look at increasing equity allocation. With improved earnings, due to lower corporate tax and correction seen in the market, has made the overall market, relatively less expensive.
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