Monthly Market Update (India) October 2017 ifast Research

Transcription

1

2 MARKETS ACROSS THE GLOBE P/E P/E P/E Earnings Growth Earnings Growth MTD YTD Return (%) Yr 2017 Yr 2018 Yr (%) 2018 (%) Asia ex Japan (MSCI Asia ex Japan) -0.27% 28.51% 2.90% % 17.50% Emerging Markets (MSCI EM) -0.55% 25.45% 8.60% % 17.40% Europe (Stoxx 600) 3.82% 7.40% -1.20% % 9.00% Japan (Nikkei 225) 3.61% 6.50% 0.40% % 10.60% USA (S&P 500) 1.93% 12.53% 9.50% % 11.00% Brazil (IBOV) 4.88% 23.36% 38.90% % 11.60% China (HS Mainland 100) -0.15% 28.30% -1.30% % 11.90% Hong Kong (HSI) -1.49% 25.24% 0.40% % 8.80% India (SENSEX) -1.41% 17.49% 1.90% % 24.70% Indonesia (JCI) 0.63% 11.41% 15.30% % 12.90% Malaysia (KLCI) -0.99% 6.93% -3.00% % 6.00% Russia (RTSI$) 3.73% -1.35% 52.20% % 11.80% Singapore (STI) -1.75% 11.77% -0.10% % 8.30% South Korea (KOSPI) 1.32% 18.16% 3.30% % 11.50% Taiwan (Taiwan Weighted) -1.91% 12.22% 11.00% % 7.70% Thailand (SET Index) 3.53% 8.44% 19.80% % 10.50% *Returns are as at 29 September Source: Bloomberg, ifast Compilations All returns are in respective local currency terms and MSCI Index returns are in USD

3 ECONOMIC INDICATORS Trade (Aug 17) Markets & Valuations Inflation (Aug 17) India s exports during August 2017 have shown growth of per cent in dollar terms valued at USD billion as compared to USD billion during August, Imports during August 2017 were valued at USD billion which was per cent higher in Dollar terms over the level of imports valued at USD billion in August, Taking merchandise and services together, overall trade deficit for April-August is estimated at USD billion as compared to USD billion during April- August Industrial Production (July 17) (As on September 29, 2017) The benchmark Index (Sensex) was at 31, Estimated PE & earnings growth for BSE Sensex Price/Earnings Earnings Growth 13.25% 24.88% 14.60% Consumer price Index (CPI) India s Consumer Price Index (CPI) for August 2017 rose to 3.36% year on year against estimates of 3.24% year on year and 2.36% year on year in July. The rise in CPI was led by rise in prices of food and beverages (1.96%), housing (5.58%), fuel and light (4.94%) and miscellaneous goods and services (3.85%). Within the food and beverages segment which has a weightage of 45% in the CPI basket, Vegetable prices rose by 6.16%, Fruits 5.29%, Milk Products 3.58% and Cereals 3.87% thus driving food inflation higher. Factors like HRA benefits to central government employees and farm loan wavers by state governments pose upside risks to CPI. After a contraction of -0.1% in June 17 the Index of Industrial Production (IIP) recovered to 1.2% in July 17. In terms of industries, eight out of twenty three industries have shown positive growth in the month of July 17. On a use base classification, manufacture of primary goods increased by 2.3% while capital goods production declined by 1% and Intermediate goods production declined by 1.8%. Infrastructure/construction goods manufacture increased by 3.7%. Production of consumer durables declined by 1.3% while consumer non-durables production increased by 3.4%. Wholesale price Index (WPI) India s Wholesale Price Index (WPI) rose to 3.24% in August 17 from 1.88% in July 17. The index for manufactured products rose by 0.20%. WPI Food Index increased from 2.12% in July, 2017 to 4.41% in August, The index for primary articles rose by 1.9%. The index for fuel and power rose by 0.90%.

4 BSE Sensex - Top & bottom performers in September (As on September 29, 2017) Top Performers MTD Bottom Performers MTD Dr Reddy's Laboratories Ltd 15% Bharti Airtel Ltd -9% Coal India Ltd 14% State Bank of India -9% Bajaj Auto Ltd 11% ITC Ltd -8% Earnings growth estimates of top weighted stocks: Stock FY-18 FY-19 FY-20 HDFC Bank Ltd % 20.94% 19.79% Housing Development Finance Corp Ltd 14.19% 16.09% 13.81% Our view The S&P BSE Sensex declined by 1.41 percent in the month of September after a decline of 2.41 percent during August. Weak macro data weighed on sentiments of market participants during September. The GDP growth rate slowed down to 5.7 percent during the first quarter of the financial year which was the lowest level reported in 3 years. Rise in headline inflation from 2.36 percent in July to 3.36 percent in August with a modest recovery in industrial production reduced the possibility of a rate cut by the Reserve Bank in the October monetary policy review. India s Current Account Deficit (CAD) expanded to 2.43 percent of the GDP during Q1 FY18 from 0.6 percent during the previous quarter due to larger increase in imports relative to exports. Geo-political tensions between the United States and North Korea continued to impact the domestic equity market. The announcement by the U.S Fed about shrinking its balance sheet from the month of October also had a negative impact on the market. On the 27th of September 2017, the market was impacted by the Indian army surgical strike on terrorist locations around the Indo- Myanmar border which led to sharp corrections in the indices. The slow pace of economic recovery and global concerns have led to FII outflows from Indian equity markets during September. EQUITY MARKET BSE-HC BSE METAL BSE AUTO BSE CD BSE CG BSE IT BSE Bankex BSE TECK BSE Oil & Gas BSE Power BSE Realty BSE FMCG Broader Indices (Performance % in September 2017)* BSE SMALL CAP BSE MID CAP Nifty Index BSE Sensex Source: Bloomberg, ifast Compilations. All returns are in respective local currency terms Sectoral Indices (Performance % in September 2017)* In the month ahead, the market will be closely watching the second quarter earning numbers of India Inc and also macro-economic data for signs of recovery. We continue to believe that India is a Stock Pickers market and hence have gone ahead and recommended funds which play on themes based on the pure conviction of fund management teams.

5 1-Sep-17 3-Sep-17 5-Sep-17 7-Sep-17 9-Sep Sep- 13-Sep- 15-Sep- 17-Sep- 19-Sep- 21-Sep- 23-Sep- 25-Sep- 27-Sep- 29-Sep- DEBT MARKET OUTLOOK Our view During the month of September 2017, the 10 year G-sec yield moved north by rising from 6.48% at the beginning of the month to 6.66% by the end of September thus rising by 18 basis points during the month. Headline inflation increased from 2.36% YoY in July to 3.36% YoY in August driven higher by rising food prices. Upside risks to CPI in the form of farm loan waivers by state governments, HRA benefits to central government employees and rise in international crude prices reduced the possibility of a rate cut by the Reserve Bank during the fourth bi monthly monetary policy review in October. During the September FOMC meet, the U.S Fed kept rates unchanged but indicated the likelihood of a rate hike by the end of 2017 and three more rate hikes in The U.S Fed also announced its decision to commence its bond selling program to the tune of 6 billion U.S Dollars per month from October. Post the U.S Fed announcement on 20th September, the benchmark 10 year bond yield rose sharply to 6.68% from 6.58% Year G-sec Yield Curve Our Take We maintain status quo on our recommendations in the fixed income space and continue to recommend short term funds to our Investors who have a time horizon of 1-3 years. On the other hand, our moderately aggressive and aggressive investors can still take exposure into dynamic bond funds.

6 GLOBAL MARKET UPDATE GROUP 7 COUNTRIES Germany (DAX) France (CAC-40) Italy (FTSE MIB) Japan (Nikkei 225) Canada (S&P/TSX) USA (S&P 500) UK (FTSE 100) *Source: Bloomberg, ifast Compilations. All returns are in respective local currency terms Our View G7 Countries - Performance in September 2017* -0.78% 4.80% 4.74% 3.61% 2.91% 1.93% 6.41% -2% 0% 2% 4% 6% 8% US ISM Manufacturing PMI came in at 58.8 in August, up from a prior 56.3 and beating consensus estimates of In terms of employment numbers, August s nonfarm payrolls print came in at 156,000, down from July s downward-revised 189,000 and falling short of consensus estimates (180,000). Manufacturing payrolls continue to surprise on the upside, while construction rose the most since February. Wages, as represented by average hourly earnings, rose 0.1% month-on-month, down from a prior 0.3% gain (wages rose 2.5% year-on-year in August). The US labour remains robust, and we expect the pace of job creation to gradually moderate lower moving forward as the business cycle matures in the US. The potential upside of the US market is now the lowest among the markets that we cover, and as such, we maintain our rating of 2.0 Stars Unattractive for the US. USA EUROPE JAPAN Composite PMIs of Germany and France continued to remain firmly in expansionary territory, pointing to expansion and growth on the continent. Consumer confidence has also continued to improve, lending support to the outlook for domestic consumption. In their latest monetary policy update, the European Central Bank (ECB) announced that no changes would be made to benchmark policy rates and its asset purchases at this juncture, but that it will soon decide on the extent of its stimulus programme for European companies are projected to see their earnings grow by 9.9% this year and by 8.5% in 2018, which is achievable and reasonable given that various indicators and data points suggest that the ongoing recovery is increasingly entrenched (barring any unforeseen adverse political developments).we maintain a 2.5 Stars Neutral rating for Europe, and advocate investors to remain an underweight exposure to European equities in their portfolios. Japanese macroeconomic data points to a favourable earnings environment, as exports grew further by 18.1% year-on-year, highest since November 2013, while manufacturing PMI stayed at satisfactory level, with firms signal healthy expansion in both output in new orders. Valuations remain rather attractive compared with other equity markets under our coverage. Thus, we maintain our star ratings of the Japanese at an Attractive rating of 3.5 stars. ISM Manufacturing PMI came in at 58.8 in Aug 17, down from 56.3 in Jul 17 Nonfarm payrolls rose by 156,000 in Aug 17, after a downward-revised 189,000 gain in Jul 17 Unemployment rate at 4.4% in Aug 17 from 4.3% in Jul 17 Advance Consumer Confidence at -1.2 in Sep 17, up from a finalised -1.5 reading in Aug 17 Germany- Advance composite PMI at 57.8 in Sep 17, up from a finalised 55.8 in Aug 17 France- Preliminary PMI composite at 57.2 in Sep 17, up from a finalised 55.2 in Aug 17 Sep Manufacturing PMI s preliminary figure rose to 52.6, up from 52.2 in Aug Exports rose 18.1% y-o-y in Aug, up from 13.4% in Jul

7 GLOBAL MARKET UPDATE ASIA PACIFIC (Ex-JAPAN) Thailand (SET Index) South Korea (KOSPI) Indonesia (JCI) Australia (S&P/ASX 200) Malaysia (KLCI) Hong Kong (HSI) Singapore (STI) Taiwan (Taiwan Weighted) Asia Pacific (Ex Japan) - Performance in September 2017* -0.58% -0.99% -1.49% -1.75% -1.91% 1.32% 0.63% *Source: Bloomberg, ifast Compilations. All returns are in respective local currency terms 3.53% -4% -2% 0% 2% 4% Malaysia s manufacturing sector returned to expansion territory with Purchasing Managers Index surging to 50.4 points from the previous month s 48.3 points. August s data portrayed a strong picture for the Malaysia manufacturing sector with overall operating conditions improving for the first time since April The growth was supported by stronger external demand with improving new demand orders particularly from China, South East Asia and Middle East. Malaysia's July industrial production surprised market participants by accelerating 6.1% year-on-year. Local industrial production expanded at the fastest rate in eight months, underpinned by a broad-based expansion where all three subsectors, namely manufacturing (+8.0%), electricity (+7.9%) and mining (+0.2%) sectors, posted positive growth rates. With the current fair valuation, the local stock market is expected to deliver a rather reasonable return for investment horizon over the next 3 years on a relative basis. As such, we maintained our star ratings for Malaysia at 3.0 stars Attractive. Our View Singapore s non-oil domestic exports (NODX) growth maintained its momentum in August, with total exports rising 17.0% year-on-year, faster than the downward-revised 7.6% growth rate in July and surpassed market expectations for a 11.8% increase. Singapore s industrial production grew 19.1% year-on-year, down from the prior month s 21.0% expansion but continued to exceed expectations (expected 16.0% yearon-year in August). All manufacturing clusters, with the exception of the general manufacturing cluster which contracted a slight -0.6%, had expanded. The electronics and biomedical manufacturing clusters had led expansion over the month with strong growth rates of 38.7% and 25.1% year-on-year respectively. Headline inflation rose 0.4% year-on-year in August, down slightly from a prior 0.6% year-on-year increase in July. The earnings growth of Singaporean corporations are likely to improve from last year in view of ameliorating global and domestic economic conditions as well as a possible bottoming out of the private residential real estate sector. We think a 4.0 Stars Very Attractive rating on the Singapore equity market continues to be warranted at this juncture. Data from South Korea points to a still favourable earnings environment, especially for semi-conductor manufacturers and banks, as export stays in high growth territory and market interest rate rises further. Under our base case assumption that US-North Korean tension will eventually subside with negotiations taking over, South Korean equities remain to be one of our favoured markets. Valuations remain rather attractive compared with other equity markets under our coverage. Thus, we maintain our star ratings of the South Korean markets at a Very Attractive rating of 4.5 stars respectively. SINGAPORE Non-oil domestic exports surged 17.0% y-o-y in Aug 17, after rising 7.6% y-o-y in Jul 17 CPI rose 0.4% y-o-y in Aug 17, down from a 0.6% y-o-y increase in Jul 17 Industrial production rose 19.10% y-o-y in Aug 17, up from a 21.2% y-o-y increase in Jul 17 Malaysia Industrial Production grew by 6.1% y-o-y in Jul 17 Nikkei Malaysia PMI improved to 50.4 from previous reading of 48.3 South Korea Exports rose by 17.4% y-o-y in Aug, compared to 19.5% in Jul

8 GLOBAL MARKET UPDATE BRIC (Ex-India) China (HS Mainland 100) *Source: Bloomberg, ifast Compilations. All returns are in respective local currency terms Our View BRIC (Ex-India) - Performance in September 2017* Brazil (IBOV) Russia (RTSI$) -0.15% 3.73% 4.88% -2% 0% 2% 4% 6% Brazil s GDP exited contractionary territory and grew 0.3% year-on-year in 2Q 2017, up from 1Q 2017 s -0.4% growth. In addition to GDP growth, other economic data releases over the course of September also reflected good progress in the country s road to economic recovery. Brazil s industrial production expanded for the third consecutive month in July 2017 and business sentiment (as revealed by a survey released by the National Confederation of Industry Brazil) in the sector has remained generally positive since the beginning of the year, while manufacturing PMIs remained above the 50.0 reading since April While we retain Brazil s star rating at 3.5 Stars Attractive, we are keeping an eye on overall valuations which currently trades at a notable premium to its fair. Russia s GDP numbers had followed an exponential upward trend, with growth coming in at 0.3%, 0.5% and 2.5% year-on-year in 4Q 2016, 1Q 2017 and 2Q 2017 respectively. In September, the central bank of Russia made the decision to cut rates further by -50 basis points to 8.50%, with a mention that the bank deems it possible to cut the key rate further over the next two quarters, boding well for economic growth in the near term. While Russia s good progress to economic recovery would likely continue to provide support to the aggregate earnings of Russian companies, structural headwinds facing oil prices coupled with the country s continued low oil production in the near term (in view of the ongoing oil production cut agreement with OPEC) presents risks to the earnings of oil companies. At this juncture, we believe that a star rating of 3.5 Stars Attractive remains warranted for the market. China s Industrial production growth declined to 6.0% year-on-year in August from 6.4% in July. The lower industrial production growth in August may be attributable to the ongoing environmental policy tightening that depressed the output growth of heavy industries and the construction activities, most of which are polluting industries. CPI picked up notably in August. CPI rose 1.8% year-on-year from 1.4% year-on-year in July, partially driven by the lower base but also pushed up by rising food prices. On the other hand, export growth slowed to 5.5% year-onyear, but the exports under ordinary trade and processing trade grew steadily. We maintain our 4.5 Stars Very Attractive rating for the offshore Chinese equity market. BRAZIL Brazil s GDP grew 0.3% y-o-y in 2Q 17,up from -0.4% y-o-y in 1Q 17 Manufacturing PMI stood at 50.9 in Aug 17, up from 50.0 in Jul 17 Industrial production rose 2.5% y-o-y in Jul 17 after a 0.5% y-o-y increase in Jun 17 RUSSIA Russia s GDP grew 2.5% y-o-y in 2Q 17 (preliminary estimates), up from 0.5% y-o-y in 1Q 17 CBR rate at 8.50% as of 25 September 2017 CHINA Exports growth slowed to 5.5% y-o-y in August, compared with 7.2% in July 17 CPI came at 1.8% y-o-y in August, higher than 1.4% in July 17 Industrial production growth slowed 6.0% y-o-y in August, down from 6.4% in July 17

9 INDIAN MUTUAL FUND INDUSTRY - ASSET TRENDS 2,500,000 2,000,000 1,500,000 1,000, ,000 0 Average Assets Under Management (AAUM) in INR Crores 2,100,194 Source: AMFI, ifast Compilations Top and Bottom Five AMCs - By Absolute Change in Assets (Q-o-Q), July- Sep 2017 Scheme Name Q-o-Q Absolute Change in Assets (INR in Crores) % Change in Assets Top 5 AMCs SBI Mutual Fund 19, % ICICI Prudential Mutual Fund 18, % Aditya Birla Sun Life Mutual Fund 18, % HDFC Mutual Fund 16, % Kotak Mahindra Mutual Fund 9, % Bottom 5 AMCs IIFCL Mutual Fund (IDF) -1, % DHFL Pramerica Mutual Fund % IIFL Mutual Fund % Escorts Mutual Fund % Taurus Mutual Fund % Source: AMFI, ifast Compilations

10 FUND CATEGORY RETURNS Fund Category Returns (As on September 2017 end) 1 Month 1 Year Equity: Large Cap Equity: Multi Cap Equity: Mid Cap & Small Cap Equity: ELSS Equity: Index Equity: Global Hybrid: Balanced Funds Hybrid: MIP Debt: Gilt Long Term Debt: Gilt Short Term Debt: Income Debt: Short Term Debt: Ultra Short Term Debt: Liquid Debt: Floating Rate Source: NAV India, ifast Compilations

11 TOP & BOTTOM EQUITY FUNDS Top and Bottom Performing Equity Funds on our Platform as on 30th September 2017 Large Cap Funds Scheme 1 Month 1 Year Scheme 1 Month 1 Year UTI-Bluechip Flexicap Fund (G) Reliance Regular Savings Fund - Equity (G) Tata Retirement Savings Fund - Progressive (G) Escorts Leading Sectors Fund (G) NSE Nifty 50 Index (Benchmark) NSE Nifty 500 Index (Benchmark) IIFL India Growth Fund (G) Motilal Oswal Most Focused Multicap 35 Fund (G) SBI Magnum Equity Fund (G) HDFC Premier Multi-Cap Fund (G) Mid and Small Cap Funds Scheme 1 Month 1 Year Scheme 1 Month 1 Year SBI Small & Midcap Fund (G) Aditya Birla SL Tax Plan (G) Parag Parikh Long Term Value Fund (G) Aditya Birla SL Tax Relief '96 (G) Nifty Free Float Midcap 100 Index (Benchmark) NSE Nifty 500 Index (Benchmark) Sahara Star Value Fund (G) Sahara Tax Gain Fund (G) LIC MF Mid Cap Fund - Regular (G) SBI Magnum Tax Gain Scheme (G) Global Funds Scheme 1 Month 1 Year DSP BR World Energy Fund (G) DSP BR World Agriculture Fund (G) MSCI World Index (in INR) (Benchmark) Kotak World Gold Fund - Standard Plan (G) DSP BR World Gold Fund (G) Source: NAV India, ifast Compilations

12 TOP & BOTTOM DEBT and HYBRID FUNDS Top and Bottom Performing Debt and Hybrid Funds on our Platform as on 30th September 2017 Balanced Funds Scheme 1 Month 1 Year Scheme 1 Month 1 Year SBI Magnum Children Benefit Plan SBI Magnum MIP Floater (G) Principal Balanced Fund - (G) Indiabulls Monthly Income Plan (G) CRISIL Balanced Fund - Aggressive Index Crisil MIP Blended Index SBI Dynamic Asset Allocation Fund (G) HDFC Monthly Income Plan - LTP (G) HDFC Prudence Fund - (G) L&T Monthly Income Plan (G) Income Funds Scheme 1 Month 1 Year Scheme 1 Month 1 Year Franklin India Income Opportunities Fund (G) Edelweiss Govt Securities Fund (G) Franklin India Corporate Bond Opportunities (G) BNP Paribas Govt Securities Fund (G) Crisil Composite Bond Fund Index Crisil Composite Bond Fund Index Escorts Income Plan - (G) Invesco India Gilt Fund (G) Kotak Bond - Regular (G) Kotak Gilt Invest - PF & Trust Plan (G) Short Term Funds Scheme 1 Month 1 Year L&T Short Term Income Fund (G) Escorts Short Term Debt Fund (G) Crisil Short-Term Bond Fund Index ICICI Pru Banking & PSU Debt Fund - Regular (G) ICICI Pru Short Term Plan (G) Source: NAV India, ifast Compilations

13 DISCLAIMER: THIS REPORT IS NOT TO BE CONSTRUED AS AN OFFER OR SOLICITATION FOR THE SUBSCRIPTION, PURCHASE OR SALE OF ANY MUTUAL FUND. ANY ADVICE HEREIN IS MADE ON A GENERAL BASIS AND DOES NOT TAKE INTO ACCOUNT THE SPECIFIC INVESTMENT OBJECTIVE OF THE SPECIFIC PERSON OR GROUP OF PERSONS. PAST PERFORMANCE AND ANY FORECAST IS NOT NECESSARILY INDICATIVE OF THE FUTURE OR LIKE PERFORMANCE OF THE MUTUAL FUND. THE VALUE OF UNITS AND THE INCOME FROM THEM MAY FALL AS WELL AS RISE. OPINIONS EXPRESSED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE. MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.