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Poonam Tandon
Chief Investment Officer

Market Matters September 2021

September saw the Indian equity markets continuing their upward march and outperforming global markets. Globally, concerns surrounding the situation of China’s largest property developer led to contagion fears but favourable domestic macro-economic data offset the above concerns and also the weak monsoon activity. Indian Fixed income markets remained volatile tracking crude oil prices and domestic macro-economic data.

Global equities especially the developed market equities saw a moderate decline whereas emerging market equities were led lower by struggling Chinese equity market performance. US Dollar rallied to one year highs on the back of Fed tapering and safe-haven demand. US Treasury yields also rose. Crude Oil rose after OPEC and allies continued with their gradual pace of restoring output cut last year. Precious metal prices remained volatile during the month. Domestically, cumulative rainfall and sowing activity ended as normal. Government approved PLI schemes for auto sector, drones and textile sector. GST revenues and PMI remained strong on the back of strengthening demand amid easing of Covid-19 restrictions. Retail inflation eased moderately. April-August FY22 fiscal deficit remained comfortable.

In the aftermath of COVID-19 outbreak, global central banks and governments launched co-ordinated policy efforts to curb the economic fallout of COVID-19 on their respective economies. This combined with rise in vaccination coverage contributed to the market recovery. As anticipated earlier, investor sentiment is tilting towards sectors such as Metals and commodities, Cap goods, Infra and Real Estate, Utilities, PSU’s, Select Auto, Cement etc. as sector and style rotation plays out leading to newer sectors emerging as market leaders. Value theme is gaining precedence leading to outperformance of value-oriented stocks. On the fixed income side, 10-Year GSEC yields were volatile on the back domestic data points and global macros.

In the near term, uncertainty continues with respect to COVID-19 and its impact on the global economic outlook. Course of key global central bank monetary policy and any signs of normalisation of the same, vaccination coverage, trajectory of reopening of economies and commodity price movement would also remain in focus. Rise in geopolitical tensions and trade tariffs are additional risk factors.

Upcoming quarter earnings would provide more clarity on sustenance of earnings momentum. Thus, optically high headline valuations could be reflective of an uptick in corporate earnings due to improving general economic activity and expectation of strong demand revival as we head into the festival season. Considering the steep rise in equity market valuations, there could be intermittent corrections. Market volatility could also rise in the short term but it can provide opportunities to accumulate quality stocks. Bond yields remained volatile tracking domestic data and global macros. Moderation in the asset purchase program by US Fed and rising Crude prices might impact the domestic markets in the near term. However, RBI’s continued accommodative monetary policy stance, normal monsoons and sowing, favourable government fisc, rising vaccination coverage could offset market concerns leading to bond yields remaining range bound.



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