Equity Monthly View for June 2024

Amidst the backdrop of policy continuity post the national elections and budget expectations, BSE Sensex advanced by 7.1% in the month of June, 2024. BSE Midcap Index advanced by 7.9% & BSE Small cap Index advanced by 10.4%. Global markets did well with S&P 500 advancing by 3.6%, majorly supported by US Tech majors. MSCI Emerging Markets Index advanced by 4.0% during the month.

Quantum Long Term Equity Value Fund (QLTEVF) saw an increase of 8.0% in its NAV in the month of June 2024; Tier-I benchmark BSE 500 and Tier-II Benchmark BSE 200 increased by 7.1% and 6.7% respectively. The performance was majorly contributed by Financials and IT. Rally in banks were triggered by attractive valuation in an otherwise expensive market. Signs of softening US inflation translating to an improvement in the macro environment and a potential pickup in revenue trajectory led to the rally in IT stocks. During the month, we trimmed few positions in auto as the upside has reduced post the recent rally. Cash in the scheme has marginally increased to 13.4%.

During the month, the key developments relating to portfolio holdings were the telecom tariff hike and consolidation in the cement space. The consolidated industry structure and essential nature of the service has enabled telecom players to execute strong pricing growth. India’s tariff levels relative to other parts of the globe offers strong pricing upside in the long term. Consolidation is accelerating in the cement sector where larger players are acquiring marginal ones. Despite sub-optimal industry utilization, consolidation along with strong housing and infrastructure demand can ensure stable pricing environment for the industry.

Overall economic indicators have posted mixed signals in the recent month. While retail automobile registrations softened across segments, wholesale volumes were better due to channel filling. Two-wheelers, aided by strong latent demand in economy segment, reported relatively better numbers compared to other segments. Purchasing Manager’s Index (PMI) continue to be in expansion trajectory with marginally better numbers compared to previous month. Residential real estate sales in top cities saw a sequential moderation, partly due to high base and high temperatures across the country. As per the recent release, non-food credit has grown at a healthy 16.2% yoy for May-2024. Barring industry (~24% of non-food credit), all other segments have recorded healthy double digit growth rates. Retail inflation further moderated to 4.75% in May, 2024. Food (39.1% of overall consumer basket) inflation continues to be sticky at 8.7%. Food prices generally tends to be volatile and has potential to rapidly moderate as the monsoon progresses. Though monsoon was deficient in June, IMD (Indian Meteorological Department) have forecasted above-average rainfall in the coming months.

Though macro environment remains resilient, the high earnings base could moderate earnings growth trajectory from here. Key monitorable from a market perspective would be the upcoming budget, global interest rate trajectory and progress of monsoon. Budget is expected to include measures to boost rural consumption. RBI’s record dividend could enable Government to pursue pro-consumption measures without disrupting the fiscal consolidation path. Softening trend in global and domestic inflation could enable central banks to reverse the interest rate trajectory. Notwithstanding a favorable macro backdrop, investors should moderate their return expectations as the market rally in recent years have led to rich valuations in many sectors.

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: BSE 500 TRI Tier II Benchmark: BSE 200 TRI	• Long term capital appreciation • Invests primarily in equity and equity related securities of companies in BSE 200 index	Investors understand that their principal will be at Very High Risk

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Above article is authored by Quantum.

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