7th November, 2016
Atul Kumar - Head - Equity Funds
In the month of October 2016, the BSE Sensex appreciated by 0.37% on total return basis. In the same month, the BSE Mid Cap Index rose 1.86% whereas BSE Small Cap Index saw a massive 5.28% increase. For the first ten months of this calendar year, Sensex has increased by 8.52%. In comparison, mid cap index has done quite well with 21.63% increase, taking the sheen off the 14.65% returns recorded by the small cap index. Reliance Industries’ stock declined 2.65% during the month. The sectors that performed well during the month were oil & gas (8.25% rise), metals and capital goods. IT and auto didn’t perform as well during the month.
FIIs sold stocks worth USD 746 million in October 2016. So far in the calendar year, they have invested USD 6.76 billion in Indian stocks. Domestic institutional investors (DIIs) counterweighed the FII selling with purchases worth USD 1.2 billion during the month. The Indian Rupee depreciated 0.25% against the US Dollar during the month.
World economic growth has remained subdued for quite some time and is unlikely to change in the coming times. Trade amongst countries has slumped to a new low since the financial crisis, as pointed by recent studies. A large part of the developed world is in the process of monetary easing. This has kept interest rates in the zero to negative territory. Low interest rates have also played a part in keeping asset prices high throughout the world. Equity, fixed income and real estate – most asset classes have benefited from easy liquidity.
Global equity markets are likely to remain on tenterhooks. Impending outcome of the US elections and probability of interest rate hike in the USA are a few uncertainties looming in the financial markets. An increase in interest rates in the USA can lead to withdrawal of FII money from emerging markets including India. This can impact stock prices negatively in the short term. Similarly, there is a possibility of protectionist measures impacting industries such as IT in case one of the candidates comes to power in the US presidential elections.
On the domestic side, the RBI had a monetary policy meeting. This was the first meeting where the interest rate was decided by the Monetary Policy Committee (MPC) comprising members from within and outside the RBI. The committee unanimously decided to cut rates by 25 bps. This was in contrast to markets polls which were split for rate cut.
Several companies declared their second quarter financial results during the month. A few companies’ results did manage to surprise the markets on the positive side. That aside, most results pointed to tepid recovery of demand as reflected in their top line. There isn’t much revival in the investment cycle too. However, this can change in the coming months. Effects of Seventh Pay Commission, better monsoon (thus higher farm income) are likely to be felt in the times to come.
In QLTEF, three stocks were trimmed during the month owing to higher valuations. Two of them were in the oil & gas space while one is a chemical company. The Scheme also added to weights in an existing capital goods stock. Cash level in the scheme at end of the month stood at 13.5%
Cash level in the QTSF was 13.5% at month end. The Scheme trimmed weight in two stocks during the month, both in the oil & gas space.
We remain optimistic about Indian equities in the long run. Indian economy is unlikely to be significantly impacted by unfavourable situations in other parts of the globe. In fact, India has been a beneficiary of fall in commodity and energy prices. The country is a bright spot in world equities, given the high GDP growth which can continue. Investors can look to add moderately to their portfolios’ weight in equity, although equities have run up since the lows of February 2016. Earnings of companies are also bottoming out. Possibility of a sharp jump in listed companies’ profits seems to be around the corner. This will result in better fundamentals for equities, which have been lacking so far. Better monsoon and Pay Commission are short-term triggers for the markets.
|Name of the Scheme||This product is suitable for investors who are seeking*||Riskometer|
|Quantum Long Term Equity Fund|
(An Open-ended Equity Scheme)
|• Long term capital appreciation and current income|
• Investments in equity and equity related securities of companies in S&P BSE 200 index
Investors understand that their principal will be at Low Risk
|Quantum Tax Saving Fund |
(An Open-ended Equity Linked Savings Scheme)
|• Long term capital appreciation|
• Investments in equity and equity related securities of companies in S&P BSE 200 index and to save tax u/s 80 C of the Income Tax Act. Investments in this product are subject to a lock-in period of 3 years
Investors understand that their principal will be at Low Risk
Data Source: Bloomberg, RBI, Indiabudget.nic.in
Disclaimer, Statutory Details & Risk Factors:
The views expressed here in this article 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. 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.QuantumMF.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.