FROM THE CEO’s DESK
Dear
Investors, “Behind every dark cloud there is an every-shining sun. Just wait.
In time, the cloud will pass.” Marianne Williamson. All inclusive, economies
are seeing recuperation with pointers, for example, PMI showing an improvement
in spite of infection resurgence in a couple of nations. U.S., Euro, and China
manufacturing activities have picked up pace, with July numbers in these three
regions crossing 50 mark, indicating expansion. Financial and monetary
policies remain exceptionally accommodative, and liquidity remains buoyant,
which should provide continued support for further economic recovery. Equity
market declines provide opportunities to buy better stocks at lower valuations.
We foresee this slowdown and the year 2020 from an investment opportunity
viewpoint rather than worrying, as the risk-reward ratio in the current
scenario is in favour of equity investments. The current positive outlook on
the global markets is well backed by negative real rates, expansion of the central
bank balance sheet along with growth recovery and medical progress on COVID-19
While there is a growing increase in the number of COVID cases on the domestic
front, there has been an improvement in the recovery rate; in India it is about
68.41 percent while 64.05 percent globally. Early signs of pent-up demand are
visible in the economy as indicated by high frequency indicators. Expected
normal monsoon and higher sowing of Kharif crops YoY gives us the solace that
the rural economy will play a major part in the future economic growth. Other
macro factors such as low oil prices and stable currency, high forex reserves
and current-account surplus will act as tailwinds for the domestic equity
market. Expectations of the Q1 FY21 earnings to bottom out by FY21, while the
economy and earnings are expected to normalize by FY23 keeping in mind the
current low interest rate scenario and high liquidity, supports valuations.
With the declining dollar index and humongous global liquidity we expect the
money to flow into EMs. In July, the domestic equity market kept witnessing
strong FII inflows coupled with steady SIP flows in mutual
funds.
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