Equity Monthly View for April 2024

S&P BSE Sensex grew by 1.1% in the month of April 2024. S&P BSE Midcap Index increased by 7.2% & S&P BSE Small cap Index advanced by 9.6% respectively. Global markets remain muted amid deferred hopes of rate cut. S&P 500 declined by 4.1%; MSCI Emerging Markets Index was flat during the month.

Domestic mutual funds and individual retail investors contributed to the recent rally. The recent data points from the US have deferred the hopes of a near term Fed rate cut. FPIs have turned sellers amid “higher for longer” global interest rates and hopes of resilient global economy including possibility of China recovery. Domestic Institutions recorded a net inflow of $ 5.3 bn while FPIs were sellers to the tune of $ 1 bn.

Quantum Long Term Equity Value Fund (QLTEVF) saw an increase of 4.1% in its NAV in the month of April 2024; Tier-I benchmark S&P BSE 500 TRI and Tier-II Benchmark S&P BSE 200 TRI increased by 3.4% and 2.7% respectively. Outperformance was majorly contributed by consumer discretionary sector. Majority of returns within consumer discretionary were contributed by a battery manufacturer and a consumer durable name. The battery manufacturer has formed a partnership with a global OEM for EV battery localisation in India. The consumer durable company laid out its strategy to focus on absolute profit growth over protecting margins. The key drag in the portfolio came from a gas transmission company which saw a downward revision in its pipeline tariff, higher than general market expectation.

During the month, we trimmed few positions in auto, metals and utilities where upside is limited. We increased our weight in a cement company which is witnessing muted pricing environment. We initiated position in a private sector bank at an attractive valuation. The bank has improved its liability mix over the past three years. This should help in improving cost of funds and thereby competitiveness in the market. The bank would be a key beneficiary of revival in private capex cycle, supported by its strong corporate relationships.

Most sectors have reported in-line results in the recent result season. Emergence of latent demand is supporting sectors such as auto and real estate. The benign credit environment is persisting in the banking sector along with reasonable credit demand. Consumer Staples continue to witness moderate demand trends, especially from rural economy. When it comes to IT sector, demand environment remains cautious with muted near-term outlook. Certain seasonal themes like air conditioners are benefiting from higher temperatures across the country.

Near term economic indicators appear robust. After accounting for refunds, net GST collection for April stood at INR 1.92 trillion, clocking a healthy growth of 15.5% compared to same period in last year. Inflation continues to be on a declining trajectory. Retail inflation eased to 4.85% in March Vs 5.09% in March,2023. Factory output measured in terms of Index of Industrial Production has been on upward trajectory. An above average monsoon forecast augurs well for economy over the near term and would support the declining trend in inflation. Key metrics like auto volume, real estate sales, commercial office absorption and cement are on a strong footing.

Notwithstanding the positive economic indicators, strong market performance in recent years have reduced upside across most sectors. Staggered investment is recommended for equity allocation at current market levels. A true to label value Fund which depicts portfolio characteristics like lower than market valuations and reasonable earnings growth can limit downside even if markets turn volatile for any unforeseen events.

Data source: Bloomberg

Name of the Scheme	This product is suitable for investors who are seeking*	Riskometer of scheme	Riskometer of Tier I & Tier II Benchmark
Quantum Long Term Equity Value Fund An Open Ended Equity Scheme following a Value Investment Strategy. Tier I Benchmark: S&P BSE 500 TRI Tier II Benchmark: S&P BSE 200 TRI	• 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.

Above article is authored by Quantum.

View All