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Dear Investors,
SC.jpgIndian stock markets rallied in line with most global markets. BSE SENSEX was up 3% and closed at all time high levels. Globally most markets rallied. US markets were up by 3-4% while European market was down during the month. BSE Midcap and Small cap indices outperformed vs broader indices. Year to date, Sensex is up by 14% vs negative return from BSE Midcap and Small cap indices.

Amongst sectors, healthcare, metals, power and IT outperformed while Auto and Oil & Gas underperformed during the month.
Globally sentiments were negative with US imposing tariffs on China and Turkey. Emerging market currencies reacted with most currencies depreciating against the USD. Indian rupee too breached the INR70 mark during the month.

India’s GDP grew by 8.2% in 1QFY19 against 7.7% growth in 4QFY18 and 5.6% growth in the base quarter. Apartfrom a favourable base effect, a sharp jump in household consumption, which grew 8.6% in 1QFY19 against 6.7%  growth in 4QFY18, contributed to the high GDP growth in 1QFY19. However, other two major components of GDP – Govt expenditure and investment – witnessed a sharp deceleration in growth in 1QFY19 to 7.6% (from 16.9% in 4QFY18) and to 8.6% (from 14.9%), respectively.

The Index of Industrial Production grew at a 5-month high of 7% in Jun ’18, up from 3.9% growth in the previous month. Mining, manufacturing and electricity sectors grew 6.6%, 6.9% and 8.5% respectively. With this reading,average IIP growth in Q1FY19 stands at 5.2%, sharply up from 1.9% growth in the corresponding quarter last year.

Headline retail inflation fell to its 9-month low of 4.17% in Jul ’18. In Jun ’18, inflation stood at 4.9%. Average inflation in FY19 so far stands at 4.6%. The biggest contributor to sequential decline in inflation was food. Food inflation fell to its 12-month low of 1.7% in Jul ’18 from 3.1% in the previous month.

The month-on-month decline in headline inflation was broad-based. Four of the six major subcomponents viz. food and beverages, pan and tobacco, clothing and footwear, and housing registered declining inflation. On the other  hand, fuel and services inflation inched up during the month.

FPIs were net buyers in Indian equities in August with USD$131mn of equity inflows during the month which took their YTD selling total to USD283mn. Domestic Institutions (DIIs) meanwhile saw USD403mn of net buying – YTD DIIs have bought USD10.4bn worth. Mutual Funds contributed USD$546mn to the net buying during the month and YTD contribution of USD11.3bn.

The earnings season finally concluded. Q1FY19 Nifty PAT increased to 11% YoY. The miss in earnings came from financials. Excluding financials, PAT grew 28% YoY. Index is currently trading at 20x vs average of 15.5x. We remain cautiously optimistic on equity markets.

Happy Investing!

Sanjay Chawla
Chief Investment Officer
Source: Bloomberg, Economic Times
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