Equity Monthly View for October 2024

Data source: Bloomberg

Indian markets declined in the month of October to the tune of 5.7%. Volatility in the markets were a result of muted earnings print and pressure on FPI flows. S & P 500 was range bound due to uncertainties around US election outcome. MSCI EM Index declined for lack of clarity on further stimulus measures to boost Chinese economy.

From a macro standpoint, the elevated vegetable prices led to inflation print at ~5.5% (CPI), which was above the market expectation. RBI maintained status quo on interest rates reiterating its stance on alignment of inflation within the target. Crude oil prices softened as geopolitical situation eased.

Market reaction during the earnings season were amplified for disappointments. Overall earnings numbers were below market expectations. FMCG companies reported soft demand environment in urban markets, leading to a reality check on high valuations commanded by this cohort. Banks reported stress buildup in certain pockets of unsecured credit. Though this mayn’t have a material impact for most of the larger banks, certain banks with higher than industry exposure to such segments witnessed sharp negative impact. Auto volumes were below expectations, especially in passenger vehicles and commercial vehicles. The shift in festive season from Q2 of previous year to Q3 in the current year could have led to a high base for recent earnings season.

Quantum Long Term Equity Value Fund (QLTEVF) saw a decline of 3.8% in its NAV in the month of October 2024; Tier-I benchmark BSE 500 and Tier-II Benchmark BSE 200 declined by 6.4% and 6.7% respectively. Financials and IT helped our performance. Absence of holdings in Energy and expensive Consumer Staples segment also supported the performance. During the month, we increased our exposure to a private sector bank, where we found the risk-reward favorable. Cash in the scheme at the end of month stood at ~16.1%.

The key watch points in the near term are the evolution of demand environment in the festive and upcoming marriage season. Early signs suggest reasonable festive demand trends, better than initial market fears. Anticipated policy changes post the recent US election result and hopes of a revival in Chinese economy could keep FII flows volatile. Regime change in US is unlikely to have a material impact on Indian corporates. Major sectors like IT and Pharma that has a disproportionate share of US revenue have tweaked their business models to minimize the impact of US policy changes. For instance, IT service providers have hired more local talent to overcome visa related uncertainties. Indian pharma companies are essential to ensure affordable pricing for major drugs. Behavior of domestic retail investors amid a phase of muted market returns could be an interesting factor to watch. Despite the recent correction, valuations continue to be unfavorable in most sectors. Funds which have incorporated risk management practices and the ones with a long-term approach are likely to outperform in this environment. Considering the above average valuations, investors may consider staggered approach for fresh investments.

Data source: Bloomberg

Name of the Scheme	This product is suitable for investors who are seeking*	Scheme Riskometer	Benchmark Riskometer (Tier I) - BSE 500 TRI & (Tier II) - BSE 200 TRI
Quantum Long Term Equity Value Fund An Open Ended Equity Scheme following a Value Investment Strategy.	• Long term capital appreciation • Invests primarily in equity and equity related securities of companies in BSE 200 index

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Above article is authored by Quantum.

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