Equity markets witnessed a strong run last month. While Nifty50 ended May at record-high level of over 15,500 points, Sensex closed at 51,900 points on May 31, 2021.
The markets, which struggled a bit in April amid mounting covid cases, started building gains in May on the back of positive global cues, declining active cases and rising vaccination.
So, where are the markets headed in June? Here's what experts have to say.
What to expect
Anoop Bhaskar, Head – Equity, IDFC AMC
- The ferocity of the second wave has caught most by surprise and it could be a dampener
to the nascent economic recovery - With fourth quarter results season underway, earnings would be the key focus for investors going forward
- Hopefully, a normal monsoon and some positive news on the covid front like ramping up of vaccine supply could help revive economic activity
- There are multiple tailwinds like large fiscal and monetary stimulus across the globe, focus on capex in the Budget and strong government spending in infra
Ashutosh Bhargava, Fund Manager and Head Equity Research, Nippon India Mutual Fund
- Market continues to climb the wall of worries
- Expect market to remain in a tight range as liquidity and earnings remain supportive but high valuations might act as a drag
- Incremental worries related to inflation overshoot and resultant Fed tapering are risks to watch out for
- Decline in covid cases, gradual reopening of the economy and strong cues from global markets are key triggers for the markets
Chintan Haria, Head- Product Development & Strategy, ICICI Prudential AMC
- Recovery to gather momentum once pandemic is brought under control through
vaccinations - Period of cyclical economic recovery expected as accommodative stance of the US Fed is likely to continue
- Apart from pandemic, markets face the risk of US Fed turning hawkish or raising rates or rolling back quantitative easing
- Macroeconomic environment is going to be critical and we may witness continued change in sectoral leaderships
- Key triggers are rise in crude oil prices leading to uptick in domestic inflation, US Treasury yields reaching 2% and rise in inflation in US
Krishna Sanghavi, CIO Equity, Mahindra Manulife Mutual Fund
- India likely to retain sector rotation trend with some upward bias as sentiments are driven by
global markets and global liquidity - Investor focus is more on economy opening up and expectation of normalisation by festive season (like in financial year 2021). Hence, a weak start of the first quarter may not hurt sentiments
- Pace of economic recovery and inflation trajectory should be keenly watched as many developed market economies open up fully post vaccination. Other triggers include US interest rates, US Fed monetary policy action and $ as currency.
- For India, major positives would be opening up of economy, availability of vaccines and policy stimulus to support growth (government & RBI)
Commentary on sectors
Anoop Bhaskar
Cyclicals such as cement / building materials, commodities and auto continue to be our focus sectors.
Ashutosh Bhargava
Despite uncertainties, we would suggest sticking with cyclicals like metals, large banks, cement, chemicals and utilities companies. Tech sector looks relatively better within defensives.
Krishna Sanghavi
Sectors where earnings are driven by global growth. The global economic recovery is likely to be quicker (relative to India) driven by economy opening up post full vaccination.
What to recommend
Anoop Bhaskar
We would recommend Balanced Advantage funds (BAF) for conservative investors. Mid and Small-cap oriented funds can be interesting for risk tolerant investors.
Ashutosh Bhargava
Multi-cap funds should be preferred. Also, strongly recommend asset allocation products like BAF and multi asset fund as volatility may not remain compressed for long and therefore diversification would help.
Chintan Haria
For those looking to invest in broader markets, can consider investing in mid and small cap funds but with an investment horizon of 10 years.
Krishna Sanghavi
Funds in multi-cap and mid-cap space offer a reasonable scope for bottom-up stock ideas. For clients with a lower risk appetite, hybrid equity and equity savings are better.
