February was an eventful month for the markets; a pro-consumption budget saw Sensex rally by over 200 points while a surprise rate cut by RBI and easing norms for well-rated NBFCs led to an uptick in auto and NBFC space. Overall, the markets started the month on a positive note. However, the increasing tensions between India and Pakistan weighed on market sentiments in the later part of the month.
How did the funds react?
Majority of the equity fund categories except large cap funds ended the month in red. Small cap funds were the worst hit.
We spoke to Gautam Sinha Roy, Sr. VP - Fund Manager, Motilal Oswal MF, V. Balasubramanian, Chief Portfolio Strategist (Equity), Mahindra MF and Vetri Subramaniam, Head-Equities, UTI MF to understand equity market triggers in the near term and their market outlook.
Triggers
There are no major events lined up in March, shared the fund managers. In the near term, the geo-political situation will influence market sentiment, said Roy. Balasubramanian too agrees that that any news on India Pakistan front will have a bearing on markets.
In addition, expectations about election outcomes will affect equity markets, according to Balasubramanian and Roy.
Roy also believes that liquidity will be a trigger for markets in near term as we are seeing a trend of weak domestic flows and rise in foreign investments.
What to expect?
According to Balasubramanian, markets are likely to be range bound with no clear bias in the near term.
Subramaniam doesn't see any major positives for the market in the short term. Corporate earnings have continued to disappoint. Both the FY19 and FY 20 numbers have been revised downwards. GDP too is showing signs of slowdown with December being the second consecutive quarter of moderate growth. However, the impact of NBFC crisis may have trickled into growth numbers pulling them down, he added.
Roy expects markets to be range bound with a negative bias if there is expectation of fractured mandate at the centre. If not markets are likely to flat line with intermittent volatility.
What should you recommend to your clients?
Investors can look at diversified and multicap funds, said Subramaniam. These funds offer fund managers the flexibility to choose best performing companies across market capitalisations.
Roy feels that investors can look large cap oriented schemes in the current scenario.
Currently we are amidst range bound market. Large caps tend to be the first to benefit when market sentiment moves. Hence, Balasubramanian believes that investors can consider investing in large cap schemes.
