Equity Market Outlook – By Anoop Bhaskar, Head – Equity, IDFC AMC
Post the election verdict, market sentiments have improved even as underlying macros appear mixed with GDP growth coming in at a 20-quarter low, while crude oil fell sharply.
Slowdown in consumption across staples and discretionary, mainly autos, was a key concern flagged by most of the companies. Besides, with the election uncertainty out of the way, cyclicals made a comeback in the month, most Stable sectors were negative.
Of the various factors needed for Cyclicals and Mid and Small Cap outperformance, quite a few are in favour namely – favourable valuations, crude prices closer to $60, yields below 7% and last but not the least a stable government at the centre.
Improvement in domestic and global growth outlook can be a key trigger for the broader markets going forward though the NIFTY may not see a significant uptick.
Debt Market Outlook – By Suyash Chaudhary, Head – Fixed Income, IDFC AMC
World growth expectations have taken a decided turn towards the worse over the past month or so. This is now reflected in expectations of easing by major central banks later in the year.
While currently the expectation would be for one last rate cut alongside continued easy liquidity, this can very quickly change towards expecting a deeper further easing should the global outlook further deteriorate.
From a bond market standpoint, the focus should remain on quality rates (sovereign, SDL, AAA) as preferred vehicles to play the current macro environment.
As developments continually highlight, the lower rated credit markets are far from settled and the spreads that can effectively be captured there may not yet be compensating for the risks involved.
[Disclaimer: The author is IDFC AMC. The views and opinions expressed in this article are those of the author and do not necessarily reflect that of Business Television India (BTVI)]