Investors can increase their exposure to equities through SIP: Atul Kumar of Quantum MF

By Atul Kumar

June turned out to be a quiet month for Indian equities. S&P BSE Sensex was marginally down by 0.54 per cent as compared to its closing in May 2019. As half of 2019 has passed, the index has given 9.86 per cent return in 2019 so far. BSE Midcap and BSE Smallcap index witnessed a sharper fall during the month with depreciation of 1.79 per cent and 4.18 per cent respectively. On year to date basis for 2019, the return is -3.76 per cent and -2.96 per cent respectively for BSE Midcap and BSE Smallcap index.

Power, metal and consumer durables were among the sectors which had leading performance during June. Oil & gas, healthcare and auto were among sectors that didn’t do well during the month. FIIs put in USD 149 million during the month to Indian equities. So for 6 months, they have invested USD 11.3 billion.

Source – Bloomberg. Past Performance may or may not be sustained in future.

Domestic institutions (DIIs) were also net buyers of equity for the month. They purchased stocks worth USD 523 million. In 2019 so far, DIIs had a net outflow of USD 1.1 billion. The Indian rupee appreciated approximately 1 per cent during the month of June.

Among global events, the meeting between presidents of U.S. and China was looked forward to at the G-20 summit for any resolution of tariff disputes. Both countries agreed not to impose any fresh duties on each other. They would also keep discussion open on future negotiation.

Global central banks on the other hand are likely to keep interest rates low. The U.S. Fed is expected to reduce benchmark rate in balance of 2019. Eurozone is also taking interest rates closer to zero as economic growth and inflation remain weak there. A significant part of government bonds are trading at negative yield in countries such as Germany and France.

India’s macroeconomic situation remains stable. Inflation continues at 3% level. With Sino-US trade tensions, global growth outlook is clouded. Major commodities including crude oil are range bound in price, keeping external deficit in control. As U.S. interest rates are forecast to fall, the U.S. dollar is not strengthening as was the case in the past. The Indian rupee is unlikely to be under pressure in such scenario.

In the beginning of July, Government presented the Union Budget for the fiscal year 2020. On the positive side, it plans to maintain fiscal deficit within 3.3 per cent . The Indian economy has been slowing. While investment demand wasn’t there for a long time, there has been a slowdown even in consumption.

Markets were looking for a stimulus to boost investment and consumption. There wasn’t much in the Budget on this count. One hopes that measures are announced outside it to accelerate economic growth. Indian corporate sector also starts reporting first quarter financial results in July.

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. Events like global trade wars have very limited impact on India. Investors can expect good return from equities over a long period in future. However, valuations have run up recently. Investors can increase their exposure to equities through SIP.

(The writer is the head of equity investments at Quantum Mutual Fund)