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Dear Investors,

Rain, Rocket, and Reversal were the three themes that dominated the news in the month of July.

First, rains and floods wreaked havoc in various parts of the country during the month affecting life in many parts of our country. However, the silver lining here is that this has reduced the monsoon deficit to about 9% from 17-18%. Further, August and September are expected to see normal rainfall. This is good news for our economy as it would be a much-needed boost to several sectors especially those in the rural economy.

Second, the Chandrayan-II took off on its way to the moon - the second one in the mission. Although the launch was delayed, it was a success and has come to define a new era in the India’s Space Programme. This will further bolster India’s image as a growing economic powerhouse. A proud moment for us as Indians! Third, July was an interesting month from the market’s point of view where we saw a reversal in a number of trends. The Budget presentation held at the beginning of the month announced higher taxation for foreign investors and the super-rich segment. This set the tone for the market and led to its highest monthly decline in 17 years. Foreign investors, who had been net-buyers in the market for the past five months, reversed their trend and became net-sellers of equities worth Rs 12,419 crore.

Gold prices also started to reverse and gather steam when it recently touched Rs 38,000/10 gms. The Rupee has also started depreciating and is valued at above Rs 70 to the dollar. Reversal was also seen in the US Federal Reserve’s stance when it announced a 25 bps rate cut in its July-end policy meet. The US Fed had been hiking rates since December 2015, so a rate-cut despite strong economic data sent conflicting signals to the market. While this occurred at the end of the month, it is expected to make markets nervous going forward.

All in all, optimism among market participants looks muted. But this is where opportunity lies for those who are looking at long-term wealth creation like we saw in case of bond yields. Bond yields have been declining for the past 6 months and ended the month at 6.37%, down 30 basis points from the start of the month. This has resulted in capital appreciation for debt investors who were patient and stayed committed to their investments.

Investment Guru Warren Buffet says, “The stock market is a device for transferring money from the impatient to the patient.” As long-term investors, one must not get impatient and get carried away by emotions in the market. The current volatility could play out for some more time as growth concerns globally continue to worry markets. Closer home, macro-economic data such as GDP numbers, IIP data, fiscal deficit numbers, tax revenues, among others have not been encouraging. Microdata such as corporate earnings, auto sales, property sales, and retail consumption data also indicate a slowdown.

Corrections in the markets are a time to invest. The way ahead from here is up. The government is taking policy decisions to revive economic growth and when that happens, investors who stayed with their investments will benefit. Invest in the market through mutual funds as they give you a diversified exposure across all asset classes, at comparatively lower risk levels.

This is the time to make the best of all the opportunities available. Stay invested and focus on your long-term goals!

Warm Regards,

Ashwani Bhatia
Managing Director & CEO