Fund Manager Speaks- March 2014

Market Overview – March, 2014

Global Markets

Not much change took place in Global economic conditions. US QE tapering continues but the economy recovery pace is slower than expected which is surely a cause of concern. European economy continues to struggle. European Central Bank further reduced the deposit rates to negative which will force Banks to promote lending.  Chinese economy is showing some signs of recovery. Institutional investors are moving money out of the developed market equity funds to emerging market equity and bond funds. Overall, it can be definitely inferred that the saturation is achieved as far as the developed markets are concerned. Therefore in this borderless world money will flow where there is a growth and return.

Indian Market

Post-election results, Indian economy is decoupled from the Global economies.  Strong election verdict in favour of Narendra Modi lead BJP alliance has rightly raised new hopes for growth in the minds of domestic and Global Industrialist, Indian and Global investors and have rejuvenated interest of  everybody . FII money continues to flow unabated. So far net seller DII’s have turned net buyers. Retail public participation, which was negative so far; have now turned positive via Mutual funds and direct participation.  Investors so far, who were overweight on Gold and Real estate and now where the returns have turned negative or showing all the signs of saturation are turning towards equity which is quite visible from the daily turnover data published by the exchanges. The high expectations from the new government as regards developments are expected to come true as observed from the various steps initiated by the PMO. The present hard working PM, who is a man of action, is known for its stress on Infrastructure developments, Good government with less governance, delegating authority with responsibility and accountability.

The stock markets are touching new highs every day. Many investment Guru and fund managers are expecting multiyear Bull Run. India is being re-rated every day. The Sensex has crossed 25K and Nifty 7.5K mark and are still not out. The only worry which we foresee is about rally in dud stocks because as usual individual investors at large, due to lack of knowledge and guidance, will again get into such stocks and will again have bad experience.

Q4 & FY14 Results

Overall performance of the corporate sector cannot be called as satisfactory. For many companies other income, weak rupee (In case of exporters) and cut in expenses have helped to maintain profitability. IT and Drug companies performed well which benefited from falling rupee but the core sector struggled due to weak demand environment. Even FMCG sector has to struggle to show growth. The Textile and Chemical did extremely well.

We at Care PMS could show strong performance during tough time mainly due to company specific approach irrespective of sector performance and focus on few companies and we time and again believe that money will flow where the value is.

Year Ahead

We are very optimistic for the stock market.  Last 5 years were very tough for the market and during this period we have seen most of the stock continuously ruling at low valuations which had made our mindset to remain very cautious in stock picking. Now post-election results, the valuations have taken a big jump. Therefore we will have to change our mindset from cautious to optimistic as the new government has initiated measures to carry out reforms for development and the RBI is also working hard to contain inflation without affecting growth.

Happy Investing!!!


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