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INVESTMENTS

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chief investment officer
AK Sridhar
Chief Investment Officer

Market Matters May 2020

Equity market indices remained volatile during the month. Market sentiments were lifted towards month end driven by optimism over the easing of the restrictions in place to contain the coronavirus outbreak and the economic relief measures taken by the government and central bank. Fixed income markets were buoyed by additional easing measures taken by RBI.

Domestically, the government extended the lockdown further to prevent the virus spread. It also announced an economic package, ‘Atmanirbhar Bharat Abhiyan’, to aid domestic demand revival. RBI cut policy rates further and extended moratorium on all term loans further. Economic data viz., economic growth, industrial production & manufacturing PMI have started reflecting the economic impact of pandemic outbreak. Trend of economic data continues to remain uncertain in the near term.

Global as well as domestic markets rally over the past 3-4 years was primarily driven by multiple expansion and without any meaningful earnings growth. Based on historical data for domestic markets, PE ratios above 21x have always been considered as expensive and the markets had been hovering in that zone for past 3-4 years. COVID-19 has acted as a trigger for expensive valuations to correct and mean revert. In the near term, growth revival would be contingent upon how the unlockdown pans out. Going ahead, the trade war & geo political tensions, impact of the extraordinary policy response, reopening of supply chain linkages, corporate earnings trajectory / shock and crude / commodity price trajectory would be monitored.

Since the economic growth trajectory remains uncertain in the medium term, market correction cannot be ruled out from current levels. Market volatility can be expected to rise but it can also provide attractive opportunities to accumulate quality stocks. A gradual increase in allocation towards equity can be considered with a 3 – 5 year perspective. Equity as an asset class has proven its ability to deliver superior returns in the long term.



Disclaimer: Linked Insurance Products are different from the traditional insurance products and are subject to risk factors. The Premium paid in unit-linked life insurance policies are subject to investment risks associated with capital markets and NAVs of the units may go up or down, based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. IndiaFirst Life Insurance Company Limited is only name of the Insurance Company and does not in any way indicate the quality of the contract, its future prospects, or returns. Please know the associated risks and the applicable charges from your Insurance Agent or the Intermediary or policy document issued by the Insurance Company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. Past performance may or may not be sustained in future and is not a guarantee of future performance. Some of the contents of this document may contain statements / estimates / expectations / predictions, which may be 'forward looking'. The actual outcomes could differ materially from those expressed /implied in this document.These statements, do not intend to provide personal recommendation to any specific individual or any investment needs of an individual. The recommendations / statements / estimates / expectations / predictions are of general in nature and may not take into account the specific investment needs or risk appetite or financial situations of individual policyholder / clients. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale. Tax benefits are subject to changes in the tax laws.