monthly market update (india)

Monthly Market Update (India) – January2020 |iFAST Research


2019 2019 2018

MTD 1Y (%) Return (%)

Asia ex Japan (MSCI Asia ex Japan) 6.42% 15.37% -16.40%

Emerging Markets (MSCI EM) 7.17% 15.42% -16.60%

Europe (Stoxx 600) 2.06% 23.16% -13.20%

Japan (Nikkei 225) 1.56% 18.20% -12.10%

USA (S&P 500) 2.86% 28.88% -6.20%

Brazil (IBOV) 6.85% 31.58% 15.00%

China (HS Mainland 100) 8.34% 12.12% -15.30%

Hong Kong (HSI) 7.00% 9.07% -13.60%

India (SENSEX) 1.13% 14.38% 5.90%

Indonesia (JCI) 4.79% 1.70% -2.50%

Malaysia (KLCI) 1.73% -6.02% -5.90%

Russia (RTSI$) 3.76% 28.55% -7.40%

Singapore (STI) 0.91% 5.02% -9.80%

South Korea (KOSPI) 5.25% 7.67% -17.30%

Taiwan (Taiwan Weighted) 4.42% 23.33% -8.60%

Thailand (SET Index) -0.68% 1.02% -10.80%

*Returns are as at 31 December 2019. Source: Bloomberg Finance L.P., iFAST Compilations All returns are in respective local currency terms and MSCI Index returns are in USD

MARKETS ACROSS THE GLOBE


Trade (November’19)

India’s exports during November 2019 were valued at USD

25.98 billion registering a negative growth of -0.34% in

dollar terms as compared to USD 26.07 billion during the

month of November 2018. Imports during November 2019

were valued at USD 38.11 billion which was 12.71% lower

in dollar terms as compared to imports which were valued

at USD 43.66 billion in November 2018.

For exports, the major commodity groups showing

positive growth over the corresponding month of last year

are Engineering Goods (6.32%), Marine Products (9.03%),

Electronic Goods (46.13%) and Drugs & Pharmaceuticals

(20.60%).

For imports, major commodity groups showing high

changes in November 2019 over the corresponding month

of last year are Transport Equipment (-48.53%), Electronic

Goods (-3.98%) and Petroleum, Crude & Products (-

18.17%). The trade deficit for the month of November

2019 stood at USD 12.12 billion vis-à-vis a deficit of USD

17.58 billion during November 2018.

Industrial Production (October‘19)

IIP was down 3.8% y-o-y in October 19 as compared to

4.3% y-o-y in September 19. The major sectors like Mining,

Manufacturing and Electricity registered y-o-y contraction

rates of -8.0%, -2.1% and -12.2% respectively. As per Use-

based classification, the growth rates in October 2019

over October 2018 are (-) 6.0 % in Primary goods, (-) 21.9

% in Capital goods, 22.2 % in Intermediate goods and (-)

9.2 % in Infrastructure/ Construction Goods. The

Consumer durables and Consumer non-durables have

recorded growth of (-) 18.0 % and (-) 1.1 % respectively.

Markets & Valuations

(As on December 31, 2019)

The benchmark Index (Sensex) was at 41,253.74

Estimated PE & earnings growth for BSE Sensex

Inflation (November’19)

India’s CPI came up at 5.54% year-on-year during the

month of November 2019 as against the prior of 4.62%

year-on-year in October 2019. Food and Beverages which

have a weightage of 54.18% in the CPI basket reported

year-on-year rise in prices by 8.66% in November 19.

Within the food and beverages segment, vegetable prices

increased by 35.99% year-on-year and pulses & products

prices increased 13.94% year-on-year. The other main

categories like Housing and Fuel & light prices grew year-

on-year by 4.49% and -1.93% respectively.

2018-19 2019-20 2020-21

Price/Earnings 27.42 23.11 18.71

Earnings Growth -2.69% 18.67% 23.49%

ECONOMIC INDICATORS


BSE Sensex - Top & bottom performers in December 2019.

Top Performers MTD Bottom Performers MTD

Tata Steel Ltd 10%

-5.5% Hindustan Unilever Ltd

Tata Consultancy Services Ltd 5%

UltraTech Cement Ltd -4.9%

ICICI Bank Ltd 5% Sun Pharmaceutical Industries Ltd -3.8%

Earnings growth estimates of top weighted stocks:

Stock FY-19 FY-20 FY-21

HDFC Bank Ltd. -3.45% 21.55% 21.41%

Reliance Industries Ltd. -3.93% 20.92% 30.66%

Equity View

In December 2019 we saw the BSE S&P Sensex give returns of 1.13%, declining

from last month’s returns of 1.66%. Sentiment was boosted on trade optimism

based on reports that U.S. and China have reached an in-principle phase one

deal. A clear victory in U.K. elections also boosted markets. Investors took hope

from the Reserve Bank of India (RBI) governor’s comments that there is scope for

reducing interest rates further after taking into consideration growth and

inflation data. Markets fell, however, when on Dec 5, 2019, RBI kept interest

rates unchanged, defying expectations of 25 bps cut. Concerns over weakening

domestic growth and rising inflationary risks further weakened the markets, and

surge in crude oil prices added to the woes. The U.S. President imposing tariffs

on foreign steel and threatening tariffs on allies like the European Union spooked

markets across the globe.

We advise our investors to stay invested and enter the market via the STP or the

SIP route depending on their risk profile and time horizon.

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

-0.78

0.93

1.02

1.13

-1 0 1 2

BSE MID CAP

Nifty Index

BSE SMALL CAP

BSE Sensex

Broader Indices (Performance % in December 2019)*

-2.71 -2.71 -2.53 -1.28

0.08 0.56 1.33 2.13 3.44 4.04 5.26 6.64

-4 -2 0 2 4 6 8 10 12 14

BSE Oil & Gas BSE FMCG

BSE CG BSE-HC

BSE Power BSE CD

BSE Bankex BSE AUTO BSE TECK

BSE IT BSE Realty

BSE METAL

Sectoral Indices (Performance % in December 2019)*

EQUITY MARKET


Fixed Income View

During December 2019, the 10-year G-Sec yield increased from 6.49% at the

beginning of the month to 6.56% by the end of the month. Bond yields surged

after the Monetary Policy Committee decided to maintain status quo on the key

policy rate amid higher inflation, worries over fiscal slippage and the

government’s plan for additional borrowing. The country’s GDP was reported at

4.5% for the Jul-Sep quarter against median forecast of 4.7%, dampening market

sentiments. Bond yields fell after RBI announced a second round of special open

market operations (OMO) via Operation Twist. RBI bought the federal

government’s 10-year benchmark bond and sold one-year notes worth up to Rs.

100 billion through a special open market operation on Dec 30.

We continue to remain positive on ultra short term funds, low duration funds,

short term funds with AAA papers and corporate bond funds.

6.00

6.20

6.40

6.60

6.80

7.00

7.20

7.40

1-N

ov-

19

3-N

ov-

19

5-N

ov-

19

7-N

ov-

19

9-N

ov-

19

11

-No

v-1

9

13

-No

v-1

9

15

-No

v-1

9

17

-No

v-1

9

19

-No

v-1

9

21

-No

v-1

9

23

-No

v-1

9

25

-No

v-1

9

27

-No

v-1

9

29

-No

v-1

9

10 Year G-sec Yield Curve

DEBT MARKET OUTLOOK


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

Our View

USA

Weakness in trade sectors and businesses still remain but US consumers coupled with

policy support should insulate the slowing economy. Being an election year means that

the likelihood of support from the US government might be elevated to avoid a severe

slowdown. US economic growth will slow entering 2020, but growth is unlikely to fall

off the cliff. Corporate fundamentals deteriorated in 2019 as margins declined while

earnings estimates were cut .With growth outlook unimpressive, support for earnings

fell. Without robust fundamentals, current expensive valuation remains unsupported

entering 2020 .US equities may rise further due to momentum but upside potential is

limited over the longer term. Risk reward has skewed notably and US remains

unattractive. We maintain our rating of 2.0 Stars “Unattractive” for the US equity

market.

Europe

Economic softness has likely bottomed but major economies remain weak, unlikely for severe

deterioration nor strong rebound in growth. Uncertainty in the region should clear up after Brexit as

we progress beyond 2Q 2020.Economic momentum is turning positive and we expect growth for

Europe to recover marginally in 2020. Earnings have declined across past quarters and remain prone

to further downgrades. Equity market has priced in (i) economic recovery, and (ii) trade deal, while

fundamentals weakened. This sets up for a possible correction should equity reprice if the economic

recovery is weaker than expected and the trade deal suffers hiccups after confirmation. Valuation

modestly overpriced with earnings growth muted. At the current juncture, we are maintaining a 2.5

Stars “Neutral” rating for Europe.

Japan

Tailwinds from positive catalysts for growth Asian export recovery, improved electronics demand,

trade deal, expansive budget stimulus. Headwinds from consumption tax and pressure on exports

showed no signs of abating and likely persist into 2020. Current economic growth remains fragile due

to Japan’s exposure to trade but we remain biased that it will hold in 2020 as the region recovers.

Favour Japanese equities due to improving corporate fundamentals (margins near cycle high, debt

levels sunk, ROE improved and closed the gap with other DMs).Japanese companies have become

more profitable and use capital more effectively (after Abe stepped into office). Valuations remained

cheap and Japan remains attractive.We maintain our star ratings of the Japanese market at an

“Attractive” rating of 3.5 stars.

0.10%

0.30%

1.06%

1.23%

1.56%

2.67%

2.86%

0% 2% 4%

Germany (DAX)

Canada (S&P/TSX)

Italy (FTSE MIB)

France (CAC-40)

Japan (Nikkei 225)

UK (FTSE 100)

USA (S&P 500)

G7 Countries - Performance in December 2019*

GLOBAL MARKET UPDATE – GROUP 7 COUNTRIES



Our View

Asia ex Japan

A rebound in Asian exports is due to 2 catalysts: 1.Cyclical upswing in global

semiconductor industry. 2. Re direction of new orders into existing production capacity

in other Asian economies. Rebound in exports and improvements in trade sectors will

spillover to other cyclical sectors, leading to an economic rebound and driving

corporate earnings higher. Profit outlook for Asian companies are expected to improve.

Sales and earnings estimates in 2020 and 2021 have reversed from their downtrend and

are revised upwards. Valuation remains cheap while supported by strong double digit

earnings growth. Other catalyst for equities include the ‘Phase 1’ trade and swing to

positive investor sentiments. We maintain a 4.5 Stars “Very Attractive” rating.

-2.37%

-0.68%

0.91%

1.73%

4.42%

4.79%

5.25%

7.00%

-4% -2% 0% 2% 4% 6% 8%

Australia (S&P/ASX 200)

Thailand (SET Index)

Singapore (STI)

Malaysia (KLCI)

Taiwan (Taiwan Weighted)

Indonesia (JCI)

South Korea (KOSPI)

Hong Kong (HSI)

Asia Pacific (Ex Japan) - Performance in December 2019*

GLOBAL MARKET UPDATE – ASIA PACIFIC (Ex-JAPAN)


GLOBAL MARKET UPDATE – BRIC (Ex-India)


Our View

China

China’s GDP growth is expected to decelerate gradually, likely falling to below

6% in 2020. Aside from trade pains in 2019 and deleveraging, slowdown also

due to maturing of the economy like DMs. Into 2020, external weakness

caused by trade dispute will alleviate and growth likely cushioned by domestic

demand: 1.China’s rebalancing effort towards consumption driven growth,

2.Burgeoning middle class. Growth should be supported by further

improvement in credit conditions and greater countercyclical efforts. Economic

growth is expected to slow but likely to be gradual and non - threatening to

Asia’s economic recovery. With a macro outlook that is expected to hold and

with trade pains alleviated, earnings of Chinese equities are projected to

improve in 2020. Earnings for China A shares will grow by double digit in 2020

one of the highest in Asia. Key headwind from trade dispute has been reduced

significantly. Valuations remain cheap and very attractive for H shares

Improved earnings prospect supports the cheap valuations. We maintain for China A-‘4.0

stars’, China H-‘4.5 stars’ “Very Attractive”.

6.85%

7.68%

8.34%

-10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%

Brazil (IBOV)

Russia (RTSI$)

China (HS Mainland 100)

BRIC (Ex-India) - Performance in December 2019*


Fund Category Returns (As on December 2019 end)

1 Month 1 Year

Equity: Large Cap 0.71 11.78

Equity: Multi Cap 0.84 9.52

Equity: Mid Cap 0.49 3.30

Equity: Small Cap 0.73 -0.21

Equity: ELSS 0.63 8.17

Equity: Index 0.47 10.14

Hybrid: Aggressive Hybrid Funds 0.58 8.25

Hybrid: Conservative Hybrid Fund 0.17 6.41

Debt: Gilt 0.14 10.78

Debt: Medium to Long Duration Fund 0.12 7.59

Debt: Short Duration Fund 0.10 4.38

Debt: Ultra Short Duration Fund 0.42 7.21

Debt: Liquid 0.43 6.41

Other: FOF Overseas 3.94 25.43

Solution Oriented Fund 0.32 7.58

Source: NAV India, iFAST Compilations

FUND CATEGORY RETURNS


Top and Bottom Performing Equity Funds on our Platform as on 31st December 2019

Large Cap Funds Multi Cap Funds

Scheme 1 Month 1 Year Scheme 1 Month 1 Year

LIC MF Large Cap Fund (G) 1.91 14.99 BNP Paribas Multi Cap Fund (G) 1.83 13.21

UTI-Mastershare (G) 1.49 10.69 IDFC Multi Cap Fund (G) 1.61 7.58

Mahindra Pragati Bluechip Yojana - Regular (G) -0.32 0.00 HDFC Equity Fund - (G) -0.02 6.83

Franklin India Bluechip Fund - (G) -0.56 5.26 Franklin India Equity Fund - (G) -0.17 3.34

Mid Cap Funds ELSS Funds


PGIM India Midcap Opportunities Fund (G) 2.06 3.57 BOI AXA Tax Advantage Fund (G) 1.98 14.61

Invesco India Midcap Fund (G) 1.66 3.80 Nippon India Tax Saver (ELSS) Fund - (G) 1.55 1.49

Franklin India Prima Fund - (G) -0.71 3.53 IDFC Tax Advantage (ELSS) Fund (G) -0.29 1.95

ICICI Pru MidCap Fund (G) -1.02 -0.61 SBI Magnum Tax Gain Scheme (G) -0.45 4.00

Small Cap Funds

Scheme 1 Month 1 Year

DSP Small Cap Fund (G) 2.75 0.74

AXIS Small Cap Fund (G) 2.23 19.38

HDFC Small Cap Fund (G) -0.64 -9.49

Tata Small Cap Fund - Regular (G) -0.70 2.56


TOP & BOTTOM EQUITY FUNDS


Top and Bottom Performing Debt and Hybrid Funds on our Platform as on 31st December 2019

Aggressive Hybrid Funds Conservative Hybrid Funds


Motilal Oswal Equity Hybrid Fund - Regular (G) 1.86 15.84 ICICI Pru Regular Savings Fund (G) 0.53 9.57

Kotak Equity Hybrid Fund (G) 1.32 14.14 SBI Debt Hybrid Fund - (G) 0.51 8.14

IDFC Hybrid Equity Fund - Regular (G) -0.43 4.66 HSBC Regular Savings Fund (G) -0.14 8.23

Tata Hybrid Equity Fund - Regular (G) -0.55 6.85 IDFC Regular Savings Fund (G) -0.19 8.12

Medium to Long Duration Funds Gilt


SBI Magnum Income Fund - (G) 1.46 11.72 ICICI Pru Gilt Fund (G) 0.97 10.82

Kotak Bond Fund - Regular (G) 0.36 10.31 SBI Magnum Gilt Fund - (G) 0.70 13.15

Aditya Birla SL Income Fund (G) -0.22 9.46 Franklin India G-Sec Fund (G) -0.26 8.00

JM Income Fund - (G) -0.43 -7.36 Tata Gilt Securities Fund - Regular (G) -0.45 9.70

Short Duration Funds


Edelweiss Short Term Fund (G) 0.67 -0.97

Indiabulls Short Term Fund (G) 0.34 5.02

HSBC Short Duration Fund (G) -0.27 -1.02

Franklin India Short Term Income (G) -0.67 4.23


TOP & BOTTOM DEBT and HYBRID FUNDS


Top and Bottom Performing Other Funds on our Platform as on 31st December 2019

FOF Overseas Funds


Aditya Birla SL Global Emerging Oppt Fund (G) 2.29 21.37

Aditya Birla SL Global Real Estate Fund (G) -0.91 19.57

Principal Global Opportunities Fund (G) 3.64 32.46

Sundaram Global Brand Fund (G) 1.87 17.56

Top and Bottom Performing Solution Oriented Funds on our Platform as on 31st December 2019

Solution Oriented Funds


UTI-CCF Investment Plan - (G) 1.56 6.89

ICICI Pru Child Care Fund-Gift Plan 1.06 8.46

SBI Magnum Children Benefit Fund -0.38 2.64

Aditya Birla SL Retirement-The 30s Plan-Reg (G) -0.41 0.00


TOP & BOTTOM OTHER & SOLUTION ORIENTED FUNDS


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. OPINIONS EXPRESSED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE.

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

monthly market update (india)

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