Equity Monthly View for February 2024

Posted On Wednesday, Mar 06, 2024


S&P BSE Sensex advanced by 1.2% in the month of February. S&P BSE Midcap Index advanced by 1.7% & S&P BSE Small cap Index declined by 1%. The relative valuation excess has led to some profit booking in small caps. Equities across the globe did well in February. S&P 500 was up 5.3%, MSCI Emerging Markets Index was up by 4.8% driven by gains in China.

The recently published GDP growth rate of 8.4% in Q3, FY24 was supported by double digit expansion in manufacturing sector. The higher GDP growth rate was partly supported by downward base revision. Consumption expenditure growth was subdued corroborating the overall slowdown of consumption in the mass market segment. Most macro indicators including inflation and GST collection are showing encouraging signs. In terms of flows, FIIs were buyers to the tune of USD 186 million in the month of February and DIIs were net buyers to the tune of $3.1bn. High global interest rates and limited valuation comfort could constrain a meaningful improvement in foreign flows.

Quantum Long Term Equity Value Fund (QLTEVF) saw an increase of 2.3% in its NAV in the month of February 2024; Tier-I benchmark S&P BSE 500 TRI and Tier-II Benchmark S&P BSE 200 TRI increased by 1.7% and 2.1% respectively. Our portfolio stocks within Financials and Healthcare majorly contributed to the outperformance. Consumer Discretionary (Auto) and Energy were the key drags.

During the month, the fund trimmed positions in segments like consumer discretionary, healthcare where valuations have reached the fair zone. We increased our position in a life insurance company and consumer durable company where valuations are favourable due to transient near-term headwinds. Cash level stood at 7.9% at the end of the month.

The key watch points in the near-term are interest rate trajectory, private capex trends and consumption in mass market. Favourable inflation trend globally and domestically can trigger central banks to initiate rate cuts over the course of 2024. As capacity utilisation in manufacturing sector has surpassed the optimal level of 75%, there is a good chance for private capex revival in the medium term. Moderation in inflation and a reasonable monsoon can support consumption in mass market segment.

The large cap cohort offer superior valuation comfort compared to mid and small caps. In case the recent market rally has skewed the allocation towards small and mid-caps, investors can consider rebalancing their portfolios. QLTEVF portfolio continues to display value characteristics at PE valuation of 15.7x Vs 18.3x of BSE-30, based on FY26E. Weighted EPS CAGR over the next two years is similar to BSE-30 index at 14.1% based on consensus estimates. In the current environment of near full valuation across multiple segments, QLTEVF portfolio offers relative valuation comfort. Investors may consider making incremental allocation in a staggered manner to benefit from the ongoing earnings upcycle.

Data source: Bloomberg

Product Labeling

Name of the Scheme

This product is suitable for investors who are seeking*

Riskometer of scheme

Riskometer of Tier I & Tier II Benchmark

Quantum Long Term Equity Value Fund

An Open Ended Equity Scheme following a Value Investment Strategy.

Tier I Benchmark: S&P BSE 500 TRI

Tier II Benchmark: S&P BSE 200 TRI

• Long term capital appreciation

• Invests primarily in equity and equity related securities of companies in S&P BSE 200 index

Investors understand that their principal will be at Very High Risk

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

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.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Above article is authored by Quantum.

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