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July 2014

The Indian equity market continued its upward momentum for the second consecutive month in June owing to positive local and global cues. CNX Nifty’s and S&P BSE Sensex’s gain in June at 5.28% and 4.94%, respectively, was lower than 8% gain each in May.  In the beginning of the month, the market rose on hopes of some positive announcements by the Reserve Bank of India (RBI) in its bi-monthly monetary policy review on June 3. However, the RBI left the key repo rate unchanged at 8%. Sentiments were boosted further after data showed that India's HSBC Manufacturing Purchasing Managers' Index rose to a three-month high of 51.4 in May from 51.3 in April. Robust buying by foreign institutional investors (FIIs) and hopes of the government announcing several measures in its budget on July 10 also augur well for the equity market.

The rise was, however, capped due to intermittent weakness in the rupee and concerns over rising oil prices amid ongoing tensions in Iraq. Rise in WPI-based inflation to a five-month high of 6.01% in May, concerns that a weak monsoon could lead to spike in inflation and sporadic profit booking during the month too resulted in market fall.

The policy changes announced in the budget and the progress of the monsoons would guide the market. Corporates’ Q1FY15 results to be announced this month too would have a bearing on market movement. Further, the market will take its cue from domestic macroeconomic data and global developments.

India’s retail inflation measured by the Consumer Price Index (CPI) eased to 8.28% in May due to a fall in the prices of vegetables, cereals and dairy products; CPI inflation was 8.59% last month. However, Wholesale Price Index (WPI)-based inflation rose to a five-month high of 6.01% in May against 5.20% in the previous month, driven by costlier protein-based items, fuel and some manufactured products.

The Budget for 2014-15 is presented by Finance Minister Arun Jaitley in the Lok Sabha on July 10. The Railway Budget was presented on July 8. To help the Railways to reduce burgeoning loses; the government has hiked railway passenger fare by 14.2% in all classes and freight charge by 6.5% with effect from June 25. The Cabinet has deferred the revision of gas prices by three months until September-end with a view to comprehensively review the complex issue and take a decision in public interest. The government has accepted the report of a committee on rationalising definitions of FDI and FII.

The International Monetary Fund (IMF) expects the Indian economy to recover to a potential growth of 6.75-7% in the coming years. A senior IMF official has suggested that India should continue to gradually bring down the fiscal deficit and usher in fuel subsidy reforms to bolster economic growth. The World Bank has cut its estimate for India’s economic growth this fiscal to 5.5% from 5.7% projected earlier, but expects the country to grow 6.3% in 2015-16 and 6.6% in 2016-17. Back home, the RBI’s financial stability report states that India’s economic growth, inflation and banks’ asset quality remain concerns.

With the markets up so sharply, there is naturally a concern among a segment of investors that they may have missed the rally. However the current phase has come after a long lull where the index had failed to pass its 2010 high. We believe that this could be the start of a bull market and even at current levels the investment opportunity may be attractive.

One needs to get invested on a systematic basis and be patient and disciplined to take advantage. History has shown us that the risk from equity markets comes down as investment horizons are extended. Investors should look beyond the day-to-day noise and invest for the long term. 

 With iSIP, you can start a SIP from the convenience of your home. Just log onto our website and start an SIP online. It’s economical and doesn’t involve any paperwork. Our Flex-STP plan allows you to take advantage of movements in the market by investing more when the markets are low and less when markets are on a higher side. We will continue to invest in a mix of technology that will help you invest and manage your investments conveniently.

As we embark on our next phase of growth. Your support and trust has only encouraged us to serve you better.  We would be glad to hear from you on our dedicated customer care numbers 1-800-425-5425 (MTNL/BSNL users only) and 080-26599420 from Monday to Saturday (8am to 10pm) and please do feel free to write to us on customer.delight@sbimf.com with any aspect of our business that you think we can improve on. Alternatively you can also visit your nearest Investor Service Centre / Investor Service Desk for any assistance.

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