Equity Outlook
03rd March, 2010
Atul Kumar - Fund Manager (Equity)
The BSE Sensex during the month of February 2010 gained marginally by 0.48%. The gain posted by broader indices such as BSE 200 and BSE 500 was even lower. The markets were waiting for cues from the Union Budget to decide the next course, so there was little movement. Some of the sectors which performed badly as compared to the market during the month were Real estate, Oil & gas and Power. The sectors which fared better than the overall market during the month were Consumer durables, IT, Healthcare and Autos.
Union Budget was the key announcement during the month gone by. Overall the Budget turned out to be quite pragmatic. From the initial reaction, it seems that the markets appreciated it. The Government has plans to reign in Fiscal Deficit and reduce it to about 4% over the next 3 years. There was reduction in overall personal tax rates which will increase the consumer spending. Some of the stimulus measures were withdrawn which led to increase in excise rates from 8% to 10%. The Government seems to pursue reforms in key areas such as energy, fertilizers etc. The corporate surcharge has been reduced and there is overall thrust to increase infrastructure spending.
Over a longer term, we remain quite positive about investing in Indian equity market. The GDP growth is likely to be 7% in current year and likely to inch up to 8% in the next year. The intent from the Govt is quite clear about reforms in the future. All this would result in better operating environment for companies and lead to better earnings in future. Increase in FII investments in India and some channeling of high domestic savings into equity are likely to improve valuations going forward. Some of the risks in the near term could be higher inflation in domestic market and worsening of economic scenario in developed markets.
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