Skip to main content

ADVICE FOR THE WISE – JULY 2020

 FROM THE CEO’s DESK

Dear Investors, “More money has been lost trying to anticipate and protect from corrections than actually in them.” Peter Lynch. The BSE Sensex had the best quarter since June 2009 and had risen more than 35 percent from lows in March, despite Covid-19 lockdown having seriously hampered economic activity. Backed by better-than - expected economic data in recent months, along with a proactive government stance and central bank policy intervention coupled with the resurgence of FPI flows into the domestic equity market, indicates towards a "V-shaped" recovery. Corrections in the equity market offer incentives for buying quality stocks at lower valuations. Instead of worrying, we expect this downturn and the year 2020 from an investment opportunity perspective as the risk-reward ratio in the current scenario is in favour of equity investments. In regards to the domestic market, while we expect second half of FY21 to see a turnaround in production, difficulties may emerge in Q1/Q2 of FY21 because of inventory disruption and the lockdown. Bold reforms in areas like land, labour, system liquidity, enhancing business-friendliness and formalizing the economy would help to re-create a “self-reliant India". The announcement of the Rupees 21trillion Covid-19 package will go a long way to help India come out of the slowdown and foster economic growth. Emergence of robust rural demand (good khariff crops harvest and forecasted above normal monsoon); a fall in the international crude prices thus relieving pressure on the CAD, rupee and inflation; a low interest rate scenario will increase the ROCE for the corporate, all of which will act as a tailwinds for the domestic equity market. We are positive on private banks, healthcare, telecom and utilities space while remaining neutral in IT and FMCG. On the equity market front, we remain optimistic and encourage investors to use any corrections, as a buying opportunity. On the domestic debt markets front, range bound movements in the benchmark yield curve is foreseen in near term, with a gradual shift downwards, though slight uptick of yield in near term due to rise in fiscal deficit pressure (post announcement of 21tn rupees Covid-19 package ), FII/FPI selling in the debt category and Moody’s downgrade of sovereign ratings for India, cannot be 4 ignored. Measures like TLTRO, LTRO and expectations that RBI may come up with OMOs for G-Secs and SDLs will bode well in reduction of the elevated spreads and limit the spike in yields. In the recent correction, mid & small caps had taken a beating too. We expect mean reversal in the course of CY20 which will allow mid & small caps to catch up on their last two years of under performance vis-à - vis the Nifty-50 index. We urge investors who are interested in mid- and small-cap space to look for companies with strong prospects for earnings growth and with reasonable valuations at beaten-down rates. Attractive equity market valuations reinforce our view of equity overweight with a bias towards large-cap stocks and selective multi-cap mutual funds and PMS (Portfolio Management Services) We suggest 65 percent for Large Cap, 25 percent for Midcap, 10 percent for Small Cap as part of the equity-sub asset class allocation. On the debt side, we remain overweight on conservative strategies and reiterate our focus on risk adjusted return on portfolios of fixed income. It is suggested that investors buy quality AAA corporate bond funds , Banking & PSU debt funds while maintaining 5 percent -7 percent as a gold-allocated volatility hedge.

Know more at http://www.karvywealth.com/data/sites/1/skins/karvywealth/Download_media_report.aspx?FileName=2FB45294-BAB5-46EF-8791-4FD984386AF5|5234459

Comments

Popular posts from this blog

Private wealth soars by 10% in FY19

The individual wealth in India has swelled by 10% in the last fiscal backed by strong growth in financial assets. The individual wealth in India has swelled by 10% in the last fiscal backed by strong growth in financial assets, a report said on Wednesday. However, compared to financial assets which grew by 10.96%, physical assets growth was at a slower pace of 7.59% and individual investors are making more investments in financial assets, Karvy Private Wealth, the wealth management arm of financial-services conglomerate Karvy Group said. Direct Equity, mutual funds, pension funds, alternative investments and international assets saw the most favorable return rate. “Direct Equity continues to hold the fort in terms of investment preference in India. This shows the belief of investors in the Indian equity markets notwithstanding the volatility it has been through,” Abhijit Bhave, Chief Executive Officer, Karvy Private Wealth, said in a statement.  Further, Prime Minister ...

The World This Week – 31st Oct – 6th Nov 2020

Indian Equity Summary- ·         On the back of improving the country 's macro scenario and strengthening of the rupee, the domestic stock market rallied in line with returns from major global peers. With the midcap stock also having stellar rise; whopping gains over five percent for the Nifty and more than twelve percent for the Bank Nifty on a weekly basis and a broad-based rally, shows that the market feels that the uncertainty is behind us and in the foreseeable future we are likely to see some powerful rally. ·         Going forward, with the uncertainty due to US elections moving out of the way volatility will reduce substantially leading to money moving towards the riskier assets; domestic factors like ongoing Q2 corporate earnings season, supreme court moratorium decisions and FII/DII inflows and USD/INR rates ; will continue to dictate the trend of the domestic equity market. We expect the trading range f...

Debt Advisory Services

Here at  Karvy Private Wealth,  we offer comprehensive solutions in the fixed income segment. We suggest debt investment options of various tenures and risk-reward profiles suitable to your portfolio. DEBT MUTUAL FUNDS ·  Gilt Funds:  Gilt Funds invest in government securities of medium to long-term maturities. There is no risk of default and liquidity is considerably higher in case of government securities. ·  Income Funds:  Income funds are total return products, which means, the return is made up of both interest income and capital appreciation or depreciation, depending upon profits or losses. The value of bond held in a long term portfolio, changes with changes in interest rates. ·  Monthly Income Plans:  Monthly Income Plans are debt oriented hybrid funds which has around 70%-85% of the portfolio in debt and rest in equity ·  Liquid Funds:  Liquid funds invest in safer short-term instruments such as Treasury Bills, Cert...