Market Outlook - July 2013
The
equity markets ended negative for the month of June with Nifty falling by
2.40%. Gold fell by 7.44% during the
month while Crude Oil rose by 3.47% to $96.85/barrel. WPI inflation eased to 4.7% in May compared to 4.89% in the previous
month. Liquidity from global markets turned negative with FII pulling out
heavily from Indian debt market and equities. Domestic institutions remained
net sellers for the month but quantum of selling reduced. Indian Rupee has
continued falling against dollar during the month and US $ appreciated 4.73%
against rupee to close at the level of 59.25 Rs/$.
RBI did
not tinker with key rates in its June 17 policy review meet where most of the
analysts were expecting rate cut. Though macro numbers were suggesting rate cut
as inflation has eased further and GDP growth has been coming down but falling
rupee and high CAD has stopped RBI from cutting rates. 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. We see 10 Year G Sec yields correcting by
50 to 75 Bps over next 12 months but in next couple of months volatility will
be higher and yields might inch up due to rupee volatility and FII negative
flows. There will be pressure on rupee and debt market as Federal Reserve
Chairman Ben Bernanke said the central bank would start to reduce its stimulus
measures later this year if the economy is strong enough. We recommend Accrual
based debt funds and Dynamic Bond Funds with 12-18 months time horizon. Equity
market will remain range bound for some more time but outlook for FY 14 and FY
15 remains positive. We hold our advice to investors to keep buying equity
mutual funds through SIP/ STP route. We have been advising profit booking and
rebalancing of gold portfolio since November in our product update. It has
corrected a lot since then. 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.
