Equity Monthly View for January 2024

S&P BSE Sensex declined by -0.6% in the month of January. S&P BSE Midcap Index & S&P BSE Small cap Index increased by 5.2% and 7.1% respectively. Mid & Small continue to outperform the large cap indices. Equities across the globe (expect China) did well in January. S&P 500 was up 1.3%, tech heavy Nasdaq Composite Index was up 1.04%; MSCI Emerging Markets Index was down by -4.6% driven by China in January.

Broader economic activity continues to track well in India, with core inflation moderating. Recent CPI inflation print at 5.7% was high driven by volatile food inflation. The result season so far has been mixed, Banks in general are witnessing margin pressure with high loan to deposit ratio driven by deposit trailing credit growth. Domestic Auto volumes continues to be strong in most sub-segments. Management outlook in IT continues to weak, though most companies are reporting better margin driven by cost control. Pharma companies have witnessed margin expansion driven by better pricing trends in key markets. In terms of flows, FIIs were sellers to the tune of USD 3.1bn in the month of January and DIIs were net buyers with $3.2bn inflows.

Quantum Long Term Equity Value Fund (QLTEVF) saw an increase of 2.8% in its NAV in the month of January 2024; Tier-I benchmark S&P BSE 500 and Tier-II Benchmark S&P BSE 200 increased by 1.9% and 1.4% respectively. Our portfolio stocks within Consumer Discretionary (Auto), utilities and IT did well. Financials driven by banks were a key drag in our portfolio mainly due to NIM pressures.

Fiscally Prudent Interim Budget: Key Takeaways

• Fiscal prudence was the key takeaway from the budget with the fiscal deficit projected to be 5.1% of GDP for fiscal year ending March 2025 down from 5.8% in fiscal year ending March 2024. Market expectations were in the region of 5.3%-5.5%. 10-year G-sec yield declined to 7.06% from yesterday’s level of 7.14%.
• Government continues to focus on infrastructure development with a 17% increase in capital expenditure for fiscal year ending March 2025 compared to revised estimates for fiscal year ending March 2024. Revised estimates for fiscal year ending March 2024 are 5% lower than budgeted numbers. There is a 11% increase in capital expenditure if one compares with budgeted estimate of previous year.
• Cut in Food subsidy (-3.3% YoY), Fertilizer subsidy (-13.2% YoY) and flat outlay on MNREGA could have implications on rural economy.

Source: Budget Documents *: Budget Estimates; #: Revised Estimates

Near term risks in our view are negative surprises on inflation trajectory, global slowdown, lack of pickup in rural demand and political uncertainty as the country heads into elections next year. To conclude, our portfolio is well positioned to benefit from cyclical economic upcycle over the medium term with major overweight being Financials and Autos. While there could be uncertainty emerging globally or in India; investors should not be unnerved by the near-term volatility and focus on allocating prudently to equities based on their financial goals. Any sharp correction due to near-term headwinds can offer additional valuation comfort and should be used to allocate more to equities with a long-term perspective.

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.

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