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February saw considerable volatility in the equity market with both the BSE and NSE indices seeing a 5% correction.
The proposed measures by the Trump government in the USA also sent jitters to the global markets.
So, what does the month of March hold for the equity markets? Cafemutual talked to some seasoned fund managers of the MF industry to shed some light on the course of the markets in March.
Alok Singh, CIO & Head of Investment, BOI MF
In February, the proposed tariff changes by US has added to the volatility in equity markets globally. In India, this coupled with slowdown in private capex raised questions on the sustainability of growth rate.
The market is currently struggling to ascertain what will be our growth rate due to the domestic and the global factors. So, if the growth rate projection is, say, 7% in the next year, I think it's a good scenario. If the market sees signs of that, then it will get a boost.
Globally, the US Fed does not seem to be favoring aggressive cuts currently. But if the economic data suggests that the US appears to be slowing down, which is looking like what the market is factoring in, then in that case, maybe they have to revert back to the rate cuts more aggressively. I think if that happens, obviously, the market reaction will be negative initially because of a recessionary environment but subsequently market will revive.
We saw a correction between January and March in 2022 due to inflation but after three to six months, these issues got resolved and the market started its upward journey. Today, the markets are getting hit because of the tariffs and the recession because of that. I can see that getting resolved in next two to four months.
Recommended Funds
Flexi-cap funds and multi-cap funds make more sense in the current market due to their balanced approach.
Anupam Tiwari, Head - Equity, Groww MF
The two major events for the equity markets in February were the Union Budget and the earnings results. The other key event was the tariff policies introduced by the new US government under Donald Trump. They disturbed the global order as they disturbed the architecture of logistics, production, manufacturing and plant locations across industries.
In March, it will remain to be seen whether Trump imposes all the proposed tariffs which would determine the global policy. Domestically, the activities will pick up ahead of the Q4 results, especially considering India’s tight liquidity condition due to selling by FIIs.
I think one has to take a very long-term view on equities. We have seen in the past that volatility like what we are seeing currently keeps on coming. But the good thing is that the overall balance sheet of the country is good. Of course, we are seeing some pressure but we have adequate reserves, so it is not a big problem. The government's fiscal deficit is in control, corporate leverage is low and the banking system balance sheet is good.
Overall, our situation is healthy in terms of macro environment. So, we will be able to sail through this crisis. I think in the medium to long term, people should be disciplined and keep on investing with a disciplined approach.
Recommended Funds
I would recommend small and mid-cap for 10 years, multi-cap for 7 years, flexi cap for 5 years and hybrid or large-cap funds for 3 years.
Rajesh Bhatia, CIO, ITI MF
The Indian equity markets are coming from a very overvalued mid-cap and small-cap space and along with a slowdown in the domestic economy, this has translated to very poor corporate results in terms of growth. This became the catalyst for the burst of the bubble in mid-cap and small-cap.
This was compounded by a very challenging global environment. The global economic uncertainty caused by the Trump tariffs and rise in long end of the yield curve across developed markets have led to incessant FIIs selling.
Most of the holding in the mid-caps and small-caps were by the domestic investors. Unfortunately, due to these negative catalysts from global markets and the domestic slowdown, there has been a sell off by domestic investors.
The global markets are very tentatively poised. The environment has become very uncertain globally as well. I am looking for a little bit of stability in March.
However, it is not going to happen very soon if the Trump administration continues to make announcements related to tariffs like it has been doing. So, given the uncertainty, my sense is that we are not going to see a V-shaped recovery but a U-shaped recovery. The markets will have to just wait out this period. There's no other choice.
Markets, when they go up, they take the steps but when they come down, they take the elevator. We are in the elevator phase and things are happening on the downside very fast.
But things will settle down at some point and I expect that to happen in March. I would say that India is still a structural story and this is a temporary challenge but it is still a challenge we have to overcome.
Recommended Funds
Balanced advantage fund and large-cap funds are recommended at this moment.
