Equity monthly view for February 2020

Posted On Wednesday, Mar 11, 2020


March 11, 2020
Quantum Equity Team

February month turned out to be bad for equities. S&P BSE Sensex fell 5.9% during the month, which was led largely by external factors. Start of the month saw sell-off which was related to disappointment with Union Budget. Thereafter global factors took over. Fall in international crude prices wiped out the losses from Budget.

Subsequently markets were gripped by fears of coronavirus. Unlike what was earlier thought that its impact was limited to China, many countries started to positive report cases and deaths related to the disease. This made stock markets fearful while bond yields fell globally. US stock market had sharpest weekly decline since Lehman crisis.

Small and midcap indices had a performance similar to BSE Sensex in February month. BSE Midcap index declined 5.3% during the month while Smallcap index shrinked by 6.4%. Among sectors, real estate, auto, metal and capital goods stood out for losses in double digits.

Telecom was rare sector which had gains during the month. Healthcare was another sector which had limited losses. Indian rupee depreciated 1.1% during the month.

Market Performance at a Glance
 Market Returns %*
 February 2020
S&P BSE SENSEX **- 5.9%
S&P BSE MID CAP **-5.3%
BEST PERFORMER SECTORSTelecom and Healthcare
LAGGARD SECTORSReal Estate, Auto, Metal and Capital Goods
* On Total Return Basis
** Source-Bloomberg
Past Performance may or may not be sustained in future.

FIIs invested USD 0.4 Bn in February. So far in the two months of 2020, they have put 1.8 Bn in Indian equities. Domestic institutions bought USD 2.3 Bn worth of stocks during the month. Their tally stands at USD 2.7 Bn so far

At global level, various agencies cut the global growth forecast on restriction of people and goods movement. US central bank expressed its opinion in January to slash interest rates to fight the consequences of emerging pandemic. The same was followed by a cut in interest rates by half percentage point in early February.

On the domestic side, macroeconomic data remains subdued. GDP growth for third quarter of fiscal 2020 came in at 4.7%. Consumer level inflation stood above 7% for previous month. Some part of this is seasonal and is likely to reverse with normalisation of food prices. Crude has been a savior for the economy, with India’s external trade balances looking favourable.

Start of March also witnessed sort of nationalization of Yes Bank, a private sector bank. Regulators capped withdrawals from the bank at Rs 50,000 creating panic among depositors. Even as depositors are assured of safety of their savings, such limits create nervousness.

Over the long term, we remain optimistic on Indian equities. India is likely to grow faster than many nations. Economy is dependent on domestic consumption and thus insulated from any global problems over the long term. While economic growth faces pressure in near term, better monsoon and measures to ease liquidity are likely to stimulate growth. Events like global trade wars have very limited impact on India.

Investors can expect good return from equities over a long period in future. We carefully assess the risk reward equation of stocks given a very dynamic global and domestic investing environment.

Data Source: Bloomberg

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

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Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

Above article is authored by Quantum.

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