Equity Monthly View for September 2024

Data source: Bloomberg

Indian markets continued to well in September. There are some signs of weakness in the mid/small cap pockets after months of outperforming the frontline indices and given the valuation differential, we find large-caps better placed than small or mid-caps. Globally, MSCI EM outperformed the BSE Sensex driven by MSCI China, which increased by a staggering 23.4% in the month of September after a slew of measure by Chinese government to revive growth.

From a macro standpoint, the key event from market perspective was the much-anticipated rate cut by US federal reserve. Post this event, market across the globe have continued to be on a strong footing. PBOC (People Bank of China) has announced a series of measures to boost growth and consumption such as interest rates cuts, supporting ailing property sector and setting up of facilities to stabilise the Chinese stock markets. Sectors such as metals have rallied on these developments.

Quantum Long Term Equity Value Fund (QLTEVF) saw an increase of 1.24% in its NAV in the month of September 2024; Tier-I benchmark BSE 500 Index and Tier-II Benchmark BSE 200 Index increased by 2.08% and 2.14% respectively. Financials and auto helped our performance, whereas IT services and pockets within consumer discretionary where the key drags. During the month, we continued to trim aggressively in Autos, where we find risk-reward unfavorable, and continue to add our existing holdings within banking and cement during the month. Cash in the scheme at the end of month stood at 15.9%.

Key updates w.r.t to some of portfolio companies/sectors in the month gone-by:

• For banks, gap between credit and deposit are narrowing driven by slowdown in credit especially in pockets such as retail. This is also driven by regulatory interventions such as increasing focus on credit to deposit ratio, increase in risk weight etc. Credit costs are also inching up in some segments such MFI, credit cards and personal loans. With normalizing credit costs, we expect differentiation between banks with better underwriting to be more evident.

• Auto: Monthly auto volumes point to weaker demand in Passenger vehicles (PV), Commercial Vehicle (CV). Relatively, 2W volumes and tractor volumes are doing well. Incrementally we are also witnessing 2W traditional players gradually ramping up and gaining market share within EV opportunity.

• Commentary from a large global IT vendor, points to a gradual recovery in IT spends. Sectors such as IT and FMCG have done well in the recent past on anticipation of demand recovery; it would be important to track the commentary and evolving demand environment here.

• In the recent past, Chinese exporters have depressed global pricing for many products worldwide due to weak domestic demand. Chinese authorities have announced a series of measures to drive growth in the economy. While there have been few such false starts in the past, we would be keenly watching our improving domestic demand in China. Sectors such as metals as a sector has rallied, anticipating better demand from China.

The key near term is risk are emanating globally such as weaker global macros and geopolitical tension across middle east. While India while continues to enjoy favorable macros and good corporate earnings growth; the valuation remains on the higher side. Thus, investors should moderate their return expectations; maintain the right asset allocation at all points in time and prudently invest towards equity.

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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