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April 2013

Reversing previous month’s trend the benchmark equity indices CNX Nifty and S&P BSE Sensex recorded a loss of 0.65% and 0.44%, respectively, in the month of March 2013. The marginal decline is because of lower investor sentiment dampened on weak economic feelers from domestic and global cues.  

On the domestic front, RBI cut its policy rate by 25 basis points on March 19 for the second time since the start of 2013 to help revive flagging growth. Meanwhile, the government continued with its efforts to enhance trade and growth in the country. Finance Minister Mr P. Chidambaram has stepped up his efforts to market India as an investment destination in the Gulf countries, Japan, Canada and the US. Among other developments, India and Africa raised their bilateral trade target for 2015 to $100 bn while India and Egypt signed pacts in key areas including information technology, electronics, defence and energy. The World Bank said that it will continue to invest $3-5 bn in India annually over the next four years to support its development objectives. Japan also decided to grant India a $2.32 bn aid for infrastructure building.

Major rating agencies were also positive, with Standard & Poor's pegging India's FY14 GDP growth at 6.4% and Moody's expecting the economy to bounce back to 7% next year. Moody’s also revised FY13 GDP forecast to 6.2% from the present 5.1%. However, Fitch Ratings lowered India’s economic growth forecast for the next financial year to 6% from its earlier forecast of 7%, while CARE pegged India’s FY14 GDP growth at 6%.
 
On the global front, according to the OECD, the group of seven (G7) most industrialised countries is recovering from the economic slowdown witnessed in late 2012. The OECD predicted 2.4% growth in Q12013 for G7 economies and 1.8% growth in Q2 with the US and Japan leading the pack; Europe, however, is lagging. Meanwhile, the BRICS countries (Brazil, Russia, India, China and South Africa) have decided to establish a new development bank to finance infrastructure and create a $100 bn contingency reserve arrangement to tackle any financial crisis in emerging economies. They also proposed to start a development bank with seed capital of $50 bn to fund their infrastructure development requirements.
 
Among economic indicators in the month, India's industrial growth rose to a three-month high of 2.4% in January, compared with a contraction of 0.5% in December and 0.8% in November. India's infrastructure sector output slumped to 2.5% in February from a year earlier, compared with a growth of 3.1% in January and 7.7% a year ago. India’s exports grew 4.3% year-on-year to US$26.26 bn in February, while imports rose 2.6% to US$41.18 bn, resulting in trade deficit of US$14.92 bn in February; the trade deficit was US$14.93 bn in February last year and US$20 bn a month ago. India's fiscal deficit in April-February, the first 11 months of the current financial year, rose 2.8% year-on-year to Rs 5.074 lakh cr; fiscal deficit was Rs 41,680 cr in February versus Rs 58,600 cr a year ago. Government's tax collections during April-February rose 15.5% year on year to Rs 8.126 lakh cr. Foreign Direct Investment (FDI) in India grew by 8% year-on-year to US$2.15 bn in January. India's HSBC manufacturing Purchasing Managers' Index (PMI) rose to 54.2 in February from a three-month low of 53.2 in January; services PMI stood at 54.2 in February, down significantly from 57.5 in January while the Composite Output Index stood at 54.8 in February, down from 56.3 in January.
 
Irrespective of the market and economic scenario, we recommend investors to maintain the discipline of asset allocation and invest in equity funds through systematic planning as long term fundamentals remain intact. Systematic Investment Plan (SIP) is the ideal way to go about in any market, as it is a smart financial planning tool that helps you build wealth, step by step, over a period of time. This disciplined approach hedges the investment against inflation too. Mutual Funds also offer opportunities for multi asset diversification thus balance the overall portfolio. 
 
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