april 2015€¦ · us nonfarm payrolls rose by 295,000 in feb 15, after a downward-revised 239,000...

April 2015

Prepared by: iFAST Research

Monthly Markets Update - India April 2015

DISCLAIMER: THIS REPORT IS NOT TO BE CONSTRUED AS AN OFFER OR SOLICITATION FOR THE SUBSCRIPTION, PURCHASE OR SALE OF ANY MUTUAL FUND. ANY ADVICE HEREIN IS MADE ON A GENERAL BASIS AND DOES NOT TAKE INTO ACCOUNT THE SPECIFIC INVESTMENT OBJECTIVE OF THE SPECIFIC PERSON OR GROUP OF PERSONS. PAST PERFORMANCE AND ANY FORECAST IS NOT NECESSARILY INDICATIVE OF THE FUTURE OR LIKE PERFORMANCE OF THE MUTUAL FUND. THE VALUE OF UNITS AND THE INCOME FROM THEM MAY FALL AS WELL AS RISE. OPINION EXPRESSED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

Equity Markets Update

2015 2015 2014 P/E P/E P/E Earnings Growth

Earnings Growth

MTD YTD Return

(%) Yr 2015 Yr 2016 Yr 2017 2015 (%) 2016 (%)

Asia ex Japan (MSCI Asia ex Japan) 0.29% 4.65% 2.20% 12.8 11.5 10.5 6.10% 11.00%

Emerging Markets (MSCI EM) -1.59% 1.91% -4.60% 12.4 10.9 9.8 0.90% 13.30%

Europe (Stoxx 600) 1.30% 15.99% 4.40% 16.8 14.9 13.4 7.60% 12.80%

Japan (Nikkei 225) 2.18% 10.06% 7.10% 21.0 18.3 16.7 20.10% 14.60%

USA (S&P 500) -1.74% 0.44% 11.40% 17.5 15.5 13.9 -1.20% 12.70%

Australia (S&P/ASX 200) -0.63% 8.88% 1.10% 17.0 15.7 14.2 -3.80% 8.80%

Brazil (IBOV) -0.84% 2.29% -2.90% 12.2 10.0 8.2 27.50% 22.70%

China (HS Mainland 100) 1.53% 6.97% 4.90% 10.6 9.4 8.4 0.00% 12.40%

Hong Kong (HSI) 0.31% 5.49% 1.30% 12.0 10.9 10.0 -1.60% 10.40%

India (SENSEX) -4.78% 1.67% 29.90% 15.6 13.2 13.2 17.60% 18.70%

Indonesia (JCI) 1.25% 5.58% 22.30% 16.2 13.8 12.3 13.40% 17.70%

Malaysia (KLCI) 0.53% 3.95% -5.70% 16.7 15.4 14.3 3.10% 8.10%

Russia (RTSI$) -1.81% 11.35% -45.20% 6.0 5.2 4.4 -20.70% 17.00%

Singapore (STI) 1.30% 2.43% 6.20% 14.2 12.9 12.0 5.60% 10.00%

South Korea (KOSPI) 2.78% 6.55% -4.80% 11.4 10.2 9.5 22.61% 11.40%

Taiwan (Taiwan Weighted) -0.37% 3.00% 8.10% 13.2 12.2 11.3 13.50% 8.00%

Technology Heavy (NASDAQ 100) -2.41% 2.30% 17.90% 18.8 16.6 14.6 6.00% 13.40%

Thailand (SET Index) -5.11% 0.55% 15.30% 14.9 13.0 11.7 9.30% 14.30%

*Returns are as at 31 March 2015. Source: Bloomberg, iFAST Compilations

All returns are in respective local currency terms and MSCI Index returns are in USD




Global Market Performance

Group 7 Countries

Events

US unemployment rate declined to 5.5% in Feb15, down from 5.7% in Jan 15

US Nonfarm payrolls rose by 295,000 in Feb 15, after a downward-revised 239,000 increase in Jan 15

US industrial production increased 0.1% m-o-m in Feb 15, after a downward-revised -0.3% decrease in Jan 15

Eurozone’s Advance Consumer Confidence rose to -3.7 in Mar 15, up from a -6.7 level in Feb 15

Bank of Japan (BOJ) held its target rate unchanged at a range between 0% to 0.1% in Mar 15

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man

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AX

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Fran

ce (

CA

C-4

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UK

(FT

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Global Indices- G7 (MTD Returns)

Source: Bloomberg, iFAST Compilations All returns are in respective local currency terms




Market Outlook

With regards to US economic data, February’s ISM Manufacturing PMI data remains in expansionary territory, and manufacturing in the US is expected to maintain accelerating momentum, contributing positively to US GDP going forward. Moving on to the labour market, job openings in the US, according to the Bureau of Labor Statistics, rose by 3.4% in January 2015 to 4.998 million, up from a downward-revised 4.877 million in December 2014, and marking a 14-year high that was last seen in January 2001. During the latest meeting of the Federal Open Market Committee (FOMC), the Federal Reserve stated that it will only consider raising the benchmark federal funds rate "when it has seen further improvement in the labour market and is reasonably confident that inflation will move back to its 2.0% objective in the medium term," but added that a rate hike in April is unlikely. The Fed also dropped the use of the word "patient" in its forward guidance for normalising monetary policy, but chairwoman Yellen reiterated during the press conference that the "modification of our guidance should not be interpreted to mean that we have decided on the timing of that increase. Eurozone’s Leading indicators continued to post broad improvement in the month of March, with the composite PMI advance reading rising to 54.1 for the month after an upward finalised 53.3 level in February. Both the services and manufacturing PMI continued to post improvements in readings, with both measures of business activity indicating that activity continued to accelerate in March. On top of improving measures of business activity, sentiment readings and surveys also continued to lend support for optimism that the Eurozone is turning the corner, with improved figures continuing to be seen. During the month, represented by Nikkei 225 Index, the Japanese equities surpassed 19000-mark for the first time since 19 April 2000. Markets have speculated that the Bank of Japan will expand its asset purchase programme due to the climbing risk of deflation. The country’s core CPI (excluding food and last year’s sale tax hike) rose 0% year-on-year in February, the first time that inflation has hit zero since May 2013. The BOJ governor Haruhiko Kuroda admitted in this month that the 2-year target of a 2% inflation rate will not be achieved. The stock market has nevertheless hit 15-year highs, partly due to the climbing expectation on more easing to be offered by the central bank.

Expert’s Opinion

Economic growth in the US is expected to remain on positive trajectory, lending support to corporate earnings growth going forward. The latest update from the Fed suggests that it is anticipated that the Fed will err on the side of caution and keep rates lower for longer (with more muted assessments of inflation and growth) – any rate hike in the future is expected to be gradual and paced out.




Asia Pacific (Ex Japan)

Events

Singapore’s CPI for Feb 15 fell by -0.3% y-o-y, after a -0.4% y-o-y decline in Jan 15 Indonesia posted a trade surplus of USD 738 million in Feb 14, compared to an

upward-revised surplus of USD 744 million in Jan 15 Bank of Thailand(BOT) cut its benchmark interest rate level by 25 bps to 1.75% Korean Won (KRW) depreciated against USD by -1.2% YTD as at 30 March 15 The Bank of Korea (BOK) lowered its benchmark 7-day repo rate by 25 basis points to

1.75% in Mar 15




Market Outlook

The Ministry of Strategy and Finance, Singapore, downgraded its forecast on the economic growth for this and next year, as weak consumer and business spending hurt the economy. The economy is now expected to grow by 3.4% in 2014, down from its previous forecast for a 3.7% growth. The Ministry said private investment and consumer spending were weaker than expected, but the condition is expected to improve next year, thanks to the plunge in oil and commodities prices. Also, with more government stimulus measures including measures to boost wages, create jobs and increase investment rolling out, domestic consumption is expected to grow by 3% in next year, the highest pace since 2011.

For Indonesia, in February, exports contracted -16.02% year-on-year, below consensus estimate of a -10.4% year-on-year decrease. In the previous month, exports contracted by an upward revised -7.71% year-on-year. This is the 5th month in a row that exports have shrunk. In the month of February, the Consumer Price Index (CPI) posted a 6.29% year-on-year increase, coming in slightly below the consensus estimates of a 6.70% year-on-year rise. The latest reading was lower than the 6.96% year-on-year increase seen in the preceding month. Despite the end of the low-base effect due the removal of a portion of the fuel subsidies, inflation continued to linger higher. Main contributors to inflation were food and processed food prices which rose 6.28% and 8.06% year-on-year respectively. Bank Indonesia kept the reference rate at 7.50%

Bank of Korea (BOK) unexpectedly lowered its benchmark 7-day repo rate by 25 basis points to a record low of 1.75% on 11 March 2015. The surprise rate cut saw the bank cutting interest rate for the first time in five months. The BOK governor Lee Ju-yeol said it was a pre-emptive move to prevent the economy from falling into deflation and also to support economic growth. South Korea’s CPI grew 0.5% year-on-year in February 2015, the slowest pace in 18 months. In addition, the recovery in domestic consumption was considerably weak. The BOK governor said that the bank will take more actions to boost the momentum in the current recovery despite the rates were cut twice in last year.

Expert’s Opinion

Overall, based on the economic data for the year-to-date, the situation in Indonesia

appears to have deteriorated, with trade balance inconsistent, inflation increasing and

manufacturing slowing. We maintain our ‘Neutral’ rating of 2.5 stars for Indonesia equities.




BRIC (Ex India) Countries

Events

Brazil’s Industrial production fell -5.2% y-o-y in Jan 15 after a downward-revised -2.9% fall in Dec 14

Brazil’s IPCA inflation was at 7.7% y-o-y in Feb 15, up from 7.1% y-o-y in Jan 15

In Brazil, Benchmark Selic rate hiked by 50 bps to 12.75% from a prior 12.25%

CPI in China rose 1.4% y-o-y in Feb 15, compared with the 0.8% y-o-y increase in Jan 15

China’s GDP in 4Q 14 increased by 7.3% y-o-y, compared with a 7.3% y-o-y increase in 3Q 14

Russia’s Industrial production declined -1.6% y-o-y in Feb 15, down from a 0.9% increase in Jan 15

Key policy rate in Russia lowered by 100 basis points from 15.00% to 14.00%

CPI in Russia increased by 16.7% y-o-y in Feb 15, up from a 15.0% increase in Jan 15




Market Outlook

Despite a minor improvement in retail sales data (retail sales increased 0.8% month-on-month, 0.6% year-on-year) in January, macroeconomic conditions continued to remain sluggish in Brazil, with inflationary pressures still climbing in the Latin American country. Brazil’s IPCA inflation increased by 7.7% year-on-year in February, up from a prior year-on-year increase of 7.1%. The Brazilian central bank has responded by continuing to tighten monetary policy, hiking the benchmark Selic rate by 50 basis points on 5 March, bringing the benchmark rate up to 12.75% from a prior 12.25%. Inflationary pressures have also climbed due to the continued weakening of the BRL (the BRL has weakened -11.6% month-to-date against the USD, -10.7% month-to-date against the SGD), weakening the purchasing power of consumers in the country. According to consensus forecasts, Brazil’s economy is expected to shrink by -0.65% in 2015 – the economy would certainly take some time to readjust to the new reality before economic momentum could start to rebound and recover.

The economic data released for China generally improved. Inflation in February rebounded to 1.4% supported by the stronger food and retail demand during the “Chinese New Year”. Official manufacturing PMI rebounded slightly from 49.8 in January to 49.9 in February, reflecting the industry was still contracting. On the other hand, exports showed an abnormally high level of growth, increasing by 48.3% y-o-y in February compared with a -3.3% y-o-y decrease in January 15. Shortly after the announcement of a RRR cut in February, the People's Bank of China (PBOC) lowered the 1 year lending rate by -25 basis points from 5.6% to 5.35% in this month. Looking forward to 2015, China’s economy will still grow at a slower pace. The manufacturing sector is expected to contribute less to overall economic growth moving forward with the anti-corruption campaign still ongoing.

Over in Russia, inflationary pressures have also climbed, with CPI increasing 16.7% year-on-year in February, up from a prior 15.0% year-on-year increase. However, unlike Brazil’s case, the Central Bank of Russia (CBR) continued to ease monetary policy, lowering the country’s benchmark interest rate by 100 basis points to 14.00% - suggesting that policy-makers are prioritising on stimulating economic growth in the country (they previously prioritised stabilising the RUB and curbing inflationary pressures). The RUB has stabilised over March and for much of 1Q 15, which could be a reason for the central bank to cut interest rates to stimulate a sluggish economy affected by the hefty decline in global energy prices. Industrial production remains weak and forward-looking indicators like PMI readings remain in contractionary territory – suggesting that the economy would also take more time before economic momentum starts to pickup and accelerate again.




Expert’s Opinion

Despite the strong rally in China A share equities, we believe the PBOC may adopt more aggressive monetary policy to support and promote credit lending activities in order to maintain a desired economic growth momentum in 2015 that is likely to lead to better market sentiment in 1H 2015.




INDIA Equity Market Outlook




India-Equity

Events

In a statement released on 4 March 2015, the RBI Governor reduced the policy repo rate under the liquidity adjustment facility (LAF) further by 25 basis points from 7.75 per cent to 7.5 per cent with immediate effect

India’s exports stood at -15.02% y-o-y to USD 21.54 billion in Feb 15 while imports were lower by 15.66% y-o-y to USD 28.39 billion

Production at factories, utilities and mines grew by 2.60% y-o-y in Jan 15 as against the consensus estimate of a 0.70% growth rate

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BSE

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MID

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ALL

CA

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India Indices (MTD Returns)

Source: Bloomberg, iFAST Compilations

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0

5

10

BSE

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BSE

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Sectoral Indices (MTD Returns)

Source: Bloomberg, iFAST Compilations




WPI Inflation stood at -2.06% y-o-y for Feb 15 as against the consensus estimate of -0.80% y-o-y decline

Consensus estimated earnings growth for FY2014-15 and FY2015-2016 are 11.88% and 20.61% respectively

Market Outlook

S&P BSE Sensex and CNX Nifty delivered -4.78% and -4.62% returns during the month of

March 2015. On the other hand, S&P BSE Mid Cap Index and S&P BSE Small Cap Index

ended in the negative territory with returns to the tune of -2.02% and -3.34% respectively.

As far as the sectors were concerned, S&P BSE Healthcare and S&P BSE Consumer Durables

were the only sectors which were in green and delivered 9.02% & 0.29% respectively. The

worst performing indices during the month were S&P BSE Metal and S&P BSE Realty which

delivered -10.45% and -8.64% during March 2015.

The negative mood in the month of March could be attributed to the geo-political tension

caused as a result of Saudi Arabia attacking the rebels in Yemen and the speculation

regarding a rate hike by the US FED.

Economic Data Gives Positive Signals

Trade In the month of February 2015, exports stood at -15.02% year-on-year and were valued at USD 21.54 billion as against USD 25.35 billion in the month of February 2014. Meanwhile, imports reduced by -15.66% year-on-year and were valued at USD 28.39 billion in February 2015 as against USD 33.66 billion in February 2014. The trade deficit for the month of February 2015 stood at USD -6.84 billion as against USD -8.31 billion in February 2014. A detailed look into the data shows that oil imports were 55.49% lower in February 15 as compared to the corresponding period last year, which led to the improvement in trade numbers. IIP

The Index of Industrial Production (IIP) for the month of January 2015 was at 2.60% when compared year-on-year, as against the Bloomberg estimate of 0.70%. The growth rates in Mining, Manufacturing and Electricity were at -2.8%, 3.3% and 2.7% respectively. On a Use-based classification, Basic Goods, Capital Goods and Intermediate Goods grew by 4.5%, 12.8% and -0.8% respectively. Inflation For the fourth time in a row, the Wholesale Price Index (WPI) showed a negative year-on-year growth, standing at -2.06% in February 2015 as compared to -0.39% in the previous month. A detailed analysis of the components shows that Primary Articles rose by 1.43% in




Feb 2015 as against 3.27% in the previous month. Within the Primary Articles component, Food Articles grew by 7.74% as against 8% in the previous month. One of the important contributors to the fall in WPI was the Fuel & Power inflation that declined further to -14.72% in Feb 2015 from -10.69% in the previous month. The inflation on Manufactured Products was at 0.33% as against 1.05% in the previous month.

Valuations

According to consensus estimates as of 26 March 2015, the estimated PE ratio for India’s

stock market (Sensex index) are 23.11X, 19.16X and 15.98X for FY2014-15, 2015-16 and

2016-17 respectively. Estimated earnings growth is 11.88% 20.61% and 19.92% for FY2014-

15, FY2015-16 and 2016-17 respectively.

Expert’s Opinion

We continue to maintain a positive stance on the markets. We would advice investors not

to get worried with the short term volatility, but continue investing into markets via the SIP

mode.




INDIA

Debt Market Outlook




India-Debt

Market Outlook

During the month of March 2015, the 10 year G-Sec Yields moved from 7.74% during the beginning of the month to 7.81% by 16th of the month and finally ended the month at 7.74%. During the first week of the month, the RBI Governor had surprised markets by reducing the Repo rate by 25 basis points and this had a positive impact on sentiments. However, the rise in CPI along with the fear of an increase in crude prices on account of the tensions in the Middle East had a negative impact on yields. Experts’ Opinion We continue to advice our moderately aggressive and aggressive investors to take an

exposure into dynamic bond funds for a time period of 2 years.

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10 Year G-sec Yield Curve




Mutual Funds




Fund Category Returns

Fund Category Returns ( as on March 2015 )

1 Month 1 Year

Equity: Large Cap -2.00% 39.14%

Equity: Multi Cap -1.21% 46.28%

Equity: Mid Cap -0.11% 68.19%

Equity: ELSS -1.44% 47.17%

Equity: Index -3.55% 28.04%

Equity: Global -1.58% 5.17%

Hybrid: Balanced -1.06% 37.08%

Hybrid: MIP 0.19% 16.69%

Debt: Gilt Long Term 0.09% 16.69%

Debt: Gilt Short Term 0.44% 11.61%

Debt: Income 0.36% 13.58%

Debt: Short Term 0.77% 10.07%

Debt: Ultra Short Term 0.85% 8.99%

Liquid 0.76% 8.81%

Debt: Floating Rate 0.83% 9.30%

Source: iFAST Compilations




Top and Bottom Performing Equity Funds in March

Top Performing Equity funds on our Platform as on 31 March 2015

Sector 1

Month 1 Year

BNP Paribas Equity Fund (G) Large Cap 1.77% 53.40%

IDFC Classic Equity Fund - Plan A (G) Large Cap 0.33% 35.87%

CNX Nifty Index (Benchmark) -4.00% 26.65%

Escorts Leading Sectors Fund (G) Multi-Cap 3.49% 65.36%

Motilal Oswal Most Focused Multicap 35 Fund (G) Multi-Cap 2.03% 0.00%

CNX 500 Index (Benchmark) -3.22% 33.56%

DSP BR Micro-Cap Fund (G) Midcap & Small Cap 4.30% 97.83%

SBI Magnum Midcap Fund (G) Midcap & Small Cap 3.00% 64.11%

CNX Midcap Index (Benchmark) -0.85% 50.96%

IDFC Tax Advantage (ELSS) Fund (G) ELSS 2.17% 54.45%

BNP Paribas Long Term Equity Fund (G) ELSS 1.43% 56.73%


Mirae Asset China Advantage Fund (G) Overseas 6.73% 16.75%

JPMorgan JF Greater China Equity Off-Shore Fund(G) Overseas 2.79% 19.86%

MSCI World Index (in INR) (Benchmark) -0.67% 8.34%





Bottom Performing Equity funds on our Platform as on 31 March 2015

Sector 1 Month 1 Year

HSBC Equity Fund (G) Large Cap -4.73% 28.29%

Sahara Super 20 Fund (G) Large Cap -4.48% 20.58%

CNX Nifty Index (Benchmark) -4.00% 26.65%

HDFC Premier Multi-Cap Fund (G) Multi-Cap -3.93% 40.72%

HSBC Dividend Yield Equity Fund (G) Multi-Cap -3.47% 33.25%


SBI Small & Midcap Fund (G) Midcap & Small Cap -3.06% 89.90%

ICICI Pru MidCap Fund (G) Midcap & Small Cap -2.37% 73.84%

CNX Midcap Index (Benchmark) -0.85% 50.96%

Sahara Tax Gain Fund (G) ELSS -5.19% 28.96%

Escorts Tax Plan-(G) ELSS -3.80% 54.48%


Kotak World Gold Fund - Standard Plan (G) Overseas -11.63% -22.55%

HSBC Brazil Fund (G) Overseas -10.51% -29.36%

MSCI World Index (in INR) (Benchmark) -0.67% 8.34%





Top and Bottom Performing Debt/Hybrid Funds in March

Top Performing Debt funds / Hybrid on our Platform as on 31 March 2015


Tata Young Citizens Fund Balanced 0.37% 33.15%

Franklin India Balanced Fund - (G) Balanced 0.18% 44.30%

Crisil Balanced Fund Index -2.36% 22.53%

Sundaram MIP - Aggressive (G) MIP 1.26% 22.29%

DWS Equity Income Fund (G) MIP 1.10% 19.84%

Crisil MIP Blended Index -0.01% 16.45%

L&T Income Opportunities Fund (G) Income 0.87% 11.46%

Reliance Corporate Bond Fund (G) Income 0.85% 0.00%

Crisil Composite Bond Fund Index 0.70% 14.59%

Escorts Gilt Fund (G) Gilt - Long Term 0.69% 7.64%

Sahara Gilt Fund (G) Gilt - Long Term 0.63% 7.96%


HDFC Banking and PSU Debt Fund (G) Short Term 1.80% 9.95%

IDFC Banking Debt Fund (G) Short Term 0.97% 9.14%

Crisil Short-Term Bond Fund Index 0.90% 10.33%





Bottom Performing Debt funds / Hybrid on our Platform as on 31 March 2015


Sundaram Balanced Fund - (G) Balanced -2.77% 20.99%

LIC NOMURA MF Balanced Fund - (G) Balanced -2.72% 31.85%

Crisil Balanced Fund Index -2.36% 22.53%

HSBC Monthly Income Plan - Savings (G) MIP -0.72% 18.45%

HDFC Monthly Income Plan - LTP (G) MIP -0.54% 21.49%

Crisil MIP Blended Index -0.01% 16.45%

DWS Inflation Indexed Bond Fund (G) Income -0.36% 2.50%

JM Income Fund - (G) Income -0.19% 13.53%


LIC NOMURA MF G-Sec Fund - (G) Gilt - Long Term -0.56% 16.37%

LIC NOMURA MF G-Sec Fund - PF Plan (G) Gilt - Long Term -0.56% 16.37%


JM Short Term Fund - (G) Short Term 0.29% 10.18%

HDFC Corporate Debt Opportunities Fund (G) Short Term 0.39% 12.06%

Crisil Short-Term Bond Fund Index 0.90% 10.33%


april 2015€¦ · us nonfarm payrolls rose by 295,000 in feb 15, after a downward-revised 239,000...

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