Markets remained supportive in March because of positive global cues, healthy foreign inflows, modest inflation and expectation of rate cut by RBI. Also, the central bank’s liquidity injection measures have played an important role in easing NBFCs liquidity stress during the last few months.
How did funds react?
Banking funds recorded highest returns in March amidst expectations of a credit offtake and better liquidity. Small and midcap funds also showed some signs of recovery by clocking higher returns than large cap funds in March.
We spoke to Gopal Agrawal, Senior Fund Manager and Head - Macro Strategy, DSP MF, Navneet Munot, CIO, SBI MF and Neelesh Surana, CIO, Mirae Asset MF to understand equity market triggers and near term outlook for equity markets.
Triggers
Corporate earnings will influence markets in April, said the fund managers. Gopal expects 4Q corporate earnings to be largely in line with market expectations. Neelesh is also bullish about corporate earnings recovery. He expects earnings to grow by 25% in FY 2019-20 albeit on a lower base.
In the near term, elections and direction of foreign flows will influence market direction, said Navneet. Neelesh too feels that news around elections will affect market sentiments in the coming months.
What to expect?
Navneet cautions that while the momentum has been strong in the last month, investors can expect some volatility due to global cues and upcoming elections.
Gopal too feels that credit offtake in financial sector, which is the backbone of the economy, will be positive for the markets. In addition, structurally lower energy prices will be positive for our current account deficit and corporate India. Overall, there is value in many pockets, he feels.
Neelesh shared that lower inflation and credit growth are a few positive indicators for markets. He feels that equities are available at reasonable valuation after the recent correction.
What should you recommend to your clients?
There are opportunities across market capitalizations and sectors, said Neelesh.
Navneet feels that investors can look at multicap funds, as there are opportunities in different pockets of markets.
Gopal expects a broad based rally in the markets and investors can start a small allocation to mid and small cap funds based on their risk appetite.
