MARKET OUTLOOK AUGUST 2013

Market Outlook  - August  2013

  

The equity markets ended negative for the month of July with Nifty falling by 1.71%. Gold rose by 14.44% during the month while Crude Oil rose by 6.43% to $103.08/barrel. WPI inflation inched higher to 4.86% in June compared to 4.7% in the previous month. FII and Domestic institutions remained net sellers for the month. Indian Rupee has continued falling against dollar during the month and US $ appreciated 2.76% against rupee to close at the level of 60.89 Rs/$.

RBI has increased the Marginal Standing Facility rate to 10.25% from 8.25% to support the falling rupee. RBI did not tinker with repo and reverse repo rate which shows that RBI tightening of monetary policy is aimed towards controlling rupee fall and does not signal reversal of policy stance. We believe that there may be short term pause by RBI in rate cuts but with one year view we expect RBI to cut rates by atleast 50 Bps. But in short term there may be huge volatility in debt funds and G Sec yields could move upwards due to rupee volatility. On strategy front we recommend Accrual based debt funds with clean portfolio and Dynamic Bond Funds having low volatility with 12-18 months time horizon. Equity market will remain range bound for next one year; hence we hold our advice to investors to keep buying equity mutual funds through SIP/ STP route. Gold has again started rising after big fall but any upside in gold should be used for exit as we do not hold positive view on gold in near term but ongoing SIPs in gold funds should be continued for long term goals like Child Marriage.