Fund Manager Speaks- September 2013

Market Overview – September 2013    

Global Capital Market Scenario

Most of the Global markets including India are ruling at peak level thanks to postponement of QE tapering by US Fed Reserve. The economic data of US and China are volatile and  are not giving any clear indications but can be considered biased towards slowdown. Continued QE measures have created much needed liquidity for developing countries like India. Further, the rate of interests is extremely low in developed nations which has enabled the developing nations to remain attractive investment destination. But sooner or later the tapering of QE3 measures are expected to take off which will put the Global markets on stress test.

Indian Capital Market Scenario

Indian market with renewed FII buying recorded new peak during Diwali amongst all odds like rising fiscal deficit, inflation & interest rates, poor IIP data, depreciating rupee. The depreciating Indian currency amidst QE measures made India most favoured investment destination. Further the reasonable valuations, above normal monsoon and intact long term growth story attracted FII funds helping index gain 10% during October’13.The FII holdings in most of the front line stocks have reached all time peak level.

The domestic institutions are net sellers due to redemption pressures from the mutual fund investors. The retail investors have deserted from the market for the valid reasons like substantial reduction in portfolio value, poor performance by mutual funds, poor corporate governance, attractive interest rates, diversion of funds in gold and real estate, lower savings due to higher inflation and most important of all is lack of good & proper guidance. The mid and small cap index have substantially under performed. The boom is restricted to few large caps from IT, FMCG and Pharma sectors and some mid and small cap stocks having merits.

The most important and satisfactory thing or change that we have noticed is that the stock market has become resilient to all continuing odds because the present index peak is on merit and therefore sustainable unlike past booms of year 2000 and 2007 which created bubble. The most worrisome thing for which RBI and the finance ministry are concerned is the deteriorating quality of Banks asset particularly of Public Sector Banks as the savings of public at large are in their custody. The reasons for the present state affairs are lack of honesty & ethics and rampant corruption.


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