Equity monthly view for January 2023

Posted On Tuesday, Feb 07, 2023


The S&P BSE SENSEX saw a decline of -2% on a total return basis in the month of January 2023 while S&P BSE Midcap Index & S&P BSE Small cap Index declined by -2.6% and -2.4% respectively. IT, Consumer Discretionary, Metals, Cap Goods and FMCG outperformed the index with positive returns. IT companies, despite the macro headwinds reported decent numbers in a seasonally weak quarter with stable orderbook. In Auto, all major OEM witnessed margin improvement driven by price hikes and normalisation in raw material costs. Metals rallied on news flow of China re-opening as it lifted the quarantine provisions. Within Cap goods sector, order book remains healthy with positive outlook on private capex reviving. Most of the other sectors trailed the benchmark with larger declines in Power, Energy and Banks. Majority of decline in these sectors is attributed to negative news flows around a specific conglomerate. Banks declined despite good quarter gone by mainly on the fears of outsized exposure to this specific conglomerate.

Globally S&P 500 advanced 6.28% in USD terms, tech heavy NASDAQ grew 10.7% in January. Indices across Europe did very well, Euro Stoxx 50 is up 11.5% in USD terms. Broader rally in these indices were driven by narrative around inflation moderating and expectation of Fed going slow on rate hikes. MSCI EM advanced by 7.9% driven by China which retuned 9.9% (USD Terms). India, after a strong CY22 is underperforming other global indices with -0.96% (USD) in the month gone by.

In terms of flows for the month, FPIs continued to be sellers in Indian markets to the tune of USD $3.5 bn. Domestic institutional investors were buyers with purchases worth USD 3.53 bn. Trends seems to be in line with what we witnessed in calendar year 2022, where FPIs have recorded a net outflow of USD 16.5 bn while DIIs recorded a net inflow of USD 35.8 bn.

Quantum Long Term Equity Value Fund (QLTEVF) saw a decline of -0.8 % in its NAV in the month of January 2023. This compares to a decline of -3.3% and -3.5% each in its Tier I benchmark S&P BSE 500 and Tier II Benchmark S&P BSE 200. Auto, IT and Utilities were major contributors to the outperformance. Cash in the scheme stood at approximately 4.5% at the end of the month. The portfolio is valued at 11.8x consensus earnings vs. the S&P BSE Sensex valuations of 15.7x based on FY25E consensus earnings; thus, displaying value characteristics.

Despite the correction in the Indian markets valuation across market capitalizations remain marginally ahead of historical medians. Some of the pockets such as staples/durables/internet remain expensive. Given the interest rate across the globe continuing to remain elevated w.r.t past decade, one can expect moderation in these expensive pockets.

Current market backdrop of relatively higher interest rate and broad-based growth suits value as a style. If we broadly look at past cycles as shown above, the outperformance/underperformance cycle of respective style be it value or growth tend to be long.

Incrementally we continue of the view that India is in broader economic upcycle driven by capex recovery which will help corporate earnings over the medium term. Recent Union Budget continues reinforce this thesis, with public capex slated to increase by 37% with bulk of spending in Road & Transport/Railways and Defense. Over a period this should have multiplier impact on the economy and help rival in private capex. Our portfolio is well positioned to capture this economic upcycle. We remain overweight on financials with a decent mix of holdings in both lending and non-lending names. We are positive on consumer discretionary especially 2 wheelers, which trade at attractive valuations and overweight on IT Services.

In our view, key monitorable in the near future are: Revival in capex, interest rate actions by central banks, evolving geo-political situation, China opening up impact on inflation and oil price trajectory. We remain constructive on Indian equities with a long-term perspective.

Data source: Bloomberg

Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*Risk-o-meter of SchemeRiskometer of Tier I BenchmarkRiskometer of Tier II Benchmark

Quantum Long Term Equity Value Fund

(An Open Ended Equity Scheme following a Value Investment Strategy)

Tier I Benchmark:

• 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.

Please visit – www.QuantumAMC.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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