Review

Macro-economic indicators

  • Retail inflation (which includes the price of food, fuel, electricity, etc.) for January 2024 came in lower at 5.10% as against the previous month’s 5.69%
  • The total loan book of banks continued to witness strong growth at 20.3%, higher than the deposit growth of 13.6%
MACRO DATA February 29, 2024 1-Month
1-Year
USD/INR 82.91 83.04 82.67
Brent Oil ($/bl) 83.62 81.71 83.89
Retail Inflation (CPI) 5.10% (Jan) 5.69% 6.52%
MARKET RATES February 29, 2024 1-Month Change 1-Year Change
10 Year Government Bond Yield 7.08% -0.07% -0.36%
10 year AAA Corporate Bond 7.56% -0.09% -0.22%

Market Review

  • RBI monetary policy committee kept the policy rate unchanged and maintained the stance at ‘withdrawal of accommodation’. In early signs of a divergence in views, there was one dissent vote on the rate decision (backing a cut) as well as calling for a change in stance. Strong growth is allowing RBI the room to stay on an extended pause

Outlook:

  • We remain ‘neutral’ on the outlook for bond markets. We expect RBI to hold rates at 6.50% till the end of FY2024 while keeping a close watch on inflation data. Markets are likely to take cues from global monetary policy actions, US yields and crude oil prices

India 10 year benchmark yield

Security Yield

EQUITY INDICES

February 29, 2024 1-Month %
Change
1-Year %
Change
3-Year %
Change
5-Year %
Change
Nifty 21,983 1.2% 27.0% 14.7% 15.3%
BSE 100 22,921 1.8% 30.7% 15.8% 15.8%
Returns of more than 1 year have been annualised

Review:

Nifty was up 1.2% for the month of February 2024:

  • Globally inflation trends are lower, China – PBoC rate cuts supported markets
  • FIIs turned marginal buyers while DIIs continued buying to the tune of $ 3.06 billion
  • Capital Goods/Infrastructure outperformed while Telecom/Cement underperformed

Outlook:

Our outlook remains Neutral in the short term and Positive in the medium term. Q3-FY2024 Real GDP growth of 8.4% YoY beat expectations; driven by higher investment (12.2% YoY). Additionally, strong growth in Investment offsets sluggish consumption to boost India's growth. We note that the Nifty P/E at 20x FY2025E is in line with 5 year mean however India’s premium to EM peers remains very high.

In the medium-term, we expect certain important drivers for growth:

  • Amidst the global uncertainties of growth, India's long-term appeal stands out
  • India’s medium term outlook remains favourable as bond index inclusion, fiscal consolidation and reforms are likely to spur economic growth

Nifty earnings CAGR over FY2024-FY2026 is expected to be 14%.

Insights corner:

How Cycles Work – and How to Make the Most out of Them? The valuation cycle, much like the economic cycle, goes through four major phases: expansion, peak, contraction, and trough. Similar to the economic cycle, certain sectors (or pockets of markets) tend to outperform others during different phases of the cycle. These cycles are crucial for generating good returns over a long period, as they provide excellent opportunities to invest and create long-term value. While the duration of each phase of these cycles is unpredictable, adopting a longer-term perspective on investing can help minimise risk and maximise returns. As money managers, we view cycles as indicators: when valuations appear stretched, investors should be willing to invest for the long term, with moderated short-term return expectations. Conversely, when the cycle is at a trough, more capital should be deployed with expectations of both short-term capital appreciation and long-term wealth creation. Investing throughout the cycle is essential for building long-term and generational wealth. ULIP as a product fits perfectly here as an investing instrument as its structure (of investing in tranches in 5 to 7 years) aligns perfectly with the long-term wealth generating strategy of investing in a disciplined way across the cycles. Happy Investing! 😊

 

COMP/DOC/Mar/2024/63/5616
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