Review

While Nifty was marginally down for the month of February 2019, US markets were up ~3.67%. Global markets continued to rally post US Fed’s dovish stance. FIIs inflows in equity market was at U$ 2.37 bn vs DII outflows of US$ 0.08 bn. While Media/Cement outperformed the index, Capital Goods/Infrastructure underperformed the index in the month of February.

 

Outlook

We remain neutral:

US markets continue rallying post US Fed dovish stance. In India, RBI policy emphasis shifts from curbing inflation to supporting growth. However, Nifty earnings downgrade continues post 3Q FY2019 results. While Nifty sales growth was above 20% for third consecutive quarter operating profit growth was at 5.2% which is the lowest in 6 quarters. However, debt default risks continues to remain an overhang for select NBFCs and corporates. Q3 FY2019 GDP growth slows to 6.6% y-o-y underlying slowdown concerns. Further, MSCI rebalancing may lead to ~US$ 2.5 bn outflow from India ceteris paribus.

 

Review

Credit and deposit growth was seen at 14.35% and 10.17% respectively for February 15, 2019. CPI inflation for January 2019 was seen at 2.05%. Indian Rupee closed against the dollar at 70.75 as on February 28, 2019. RBI announced Open Market Operations (OMOs) worth `25,000 crores for March. Additionally, RBI announced long term repos for `1 trillion as an additional liquidity measure.

 

Outlook

We have a cautious outlook on bonds. Large borrowings by the central government, state government and the private sector will remain the biggest concern for the market. Concerns over political uncertainty will weigh on market sentiment. However, expectations of a rate cut by RBI in April policy will lend support to the market. The quantum of Open Market Operations (OMOs) by RBI will be a key factor in determining the yield trajectory going forward.

 

COMP/DOC/Mar/2019/83/2163
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