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Rising food inflation, Hindenburg report, union budget announcement and rate hikes by central banks have kept the markets quite volatile in February. While there were several ups and downs, both the key indices remained flat last month.
Considering all these events will continue to impact the markets, what will happen and what should you recommend to your clients in March.
Here’s what fund managers have to say.
Ashutosh Bhargava, Fund Manager and Head Equity Research, Nippon India Mutual Fund
Outlook
Earnings season of the third quarter was mixed wherein financials led the pack. While broader market continued its downward bias, it is likely to remain rangebound in the coming months. Further, broader market valuations are turning more attractive but currently, it lacks upside trigger in near term.
Major triggers for the current market could be the US Fed policy guidance, global flows and global & domestic growth data.
Valuations are still expensive for large caps but on relative basis India’s valuation premium versus other markets have sharply narrowed.
Promising sectors
Continue to prefer financials and select discretionary sectors like autos, hospitality, and capital goods.
Recommended fund categories
Multicap and flexicap funds are best suited as attractive price value gaps are available across sectors and size categories. Conservative investors should look at asset allocation offerings like balance advantage funds and multi asset funds.
Daylynn Pinto, Senior Equity Fund Manager, IDFC Mutual Fund
Outlook
We continue to remain cautious as we believe the market continues to remain optimistic on peak rates and the inflation trajectory in the near term. This downgrade cycle is likely to continue for a couple of quarters.
Any softening in US wage growth and overall global inflationary trends will be good for markets. Incrementally, lower energy prices and good monsoons could help India improve its deficit issues. We believe that valuations are marginally expensive across market capitalization segments with a large divergence across sectors.
Promising sectors
Autos and energy as these businesses have high operating and free cash yields
Recommended fund categories
Value funds, large cap and multi-cap
Gaurav Misra, Co- Head Equity, Mirae Asset Mutual Fund
Outlook
In the short term, expect markets to remain volatile. However, we may see upshots if confidence sustains on the strength of Indian macros and earnings.
Overall, the union budget played a fine balancing act. While overall fiscal stance is modestly pro-cyclical in the coming year, capex boost is quite welcome, in the backdrop of strong financial sector balance sheet. Also, with commodities receding from the peak, we expect current account deficit (CAD) and inflation concerns to subside over the course of 2023.
Promising sectors
Banking and financial sectors space and consumption theme will continue to pay off
Recommended fund categories
MFDs should look at flexi cap funds, large and mid-cap funds
Krishna Sanghavi, CIO – Equity, Mahindra Manulife MF
Outlook
The broad outlook for equity markets remains cautious amidst the uncertainties over geopolitics, economic outlook and policy environment. Valuation-wise, Indian markets continue to trade at a premium, which may deter FPIs, especially when they compare India with other emerging markets. From a domestic liquidity side, investors' behavior towards higher interest rates on a fixed income may impact the market movement over the next 12 months.
Triggers lie more outside India and the global central bank's change in hawkish stance is perhaps the big trigger for a rally across financial markets. From the Indian market, the triggers are economic growth, monsoon expectations and cooling of inflation.
Recommended fund categories
Investors should explore flexi cap and focused funds
Shreyash Devalkar, Senior Equity Fund Manager, Axis Mutual Fund
Outlook
Directionally, markets are likely to remain range bound until there are new triggers or events to take markets upwards or downwards.
The two major events that the market was looking at for direction were the budget and the RBI policy. With that out of the way, markets are oscillating without any clear direction driven by global forces. The risks today from an equity markets standpoint are largely overseas. We do not anticipate this to change in the near term.
Recommended fund categories
Multi-cap funds could be ideally suited to navigate the current uncertain market environment.
