Equity Outlook
07th May, 2012
Atul Kumar- Fund Manager (Equity)
In the month of April 2012, BSE Sensex fell marginally by 0.49% on total return basis as compared to its level in previous month. Some of the broader indices such as BSE 200 and BSE 500 fell higher in comparison to the Sensex. FMCG and Auto were among the sectors which performed better during the month. IT, Capital goods and Realty were among the sectors which fell highest. Calendar year to date, the Sensex has given a return of 12.32%.
FIIs were net sellers during the month to the tune of USD 102.58 Mn. So far in calendar 2012, FIIs have put in USD 8.76 Bn. Domestic mutual funds have been net sellers in equities to the tune of USD 1.24 Bn so far during the year.
On the policy front, RBI reduced the Repo rates by 0.5%, as a signal to softer interest rates. Inflation still remained high with WPI at 6.89% during the month, though there was a fall in core inflation. RBI also expects the GDP to grow approx. 7% in fiscal 2013. There has still been no clarity on GAAR, which proposes taxation of equity gains from places such as Mauritius with whom India has favorable tax treaty. On policies impacting companies, the gas regulator passed an order which cut pipeline tariffs of a City gas distributor with a retrospective effect. There was also a TRAI recommendation during the month which proposes to increase the spectrum charges significantly for telecom operators. Indian corporate sector has also started announcing the results for the last quarter, which has been in line with expectations largely
We remain optimistic about Indian equities in the long run. Even after brief the rally in year so far, we see the equity valuations as reasonable. Irrespective of the global economic problems, we see India well poised to achieve a GDP growth of 7% over next many years.
Source: Bloomberg, Morgan Stanley Report
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