Monthly Market Commentary - Aug '17

Wealocity's perspective on the market happenings.                                                             Monthly Market Commentary Aug'17

Marking a milestone Life isn't a matter of milestones, but of moments. ~ Rose Kennedy. For the first time in its history, the NIFTY has crossed 10,000 and closed above it. It’s a very big psychological mark and the journey so far has been pretty interesting ala a rollercoaster from 1,000 in 1995 to 10,000 in 2017. However, during the same period the market capitalization has seen a 48x at a CAGR of 20% while for the investors it has delivered a 11% CAGR on the index. The first 1K increase was at the slowest pace taking almost 9 years while the next slowest is the journey from 6,000 in '07 to 7,000 in '14 about 7 years. The quickest 1K jump is from 5,000 to 6,000 in 2007 which took just 52 trading days while the next quickest is the race from 7,000 to 8,000. Elaborating further into the statistics, the index has hit new all-time highs twice in 2006, 2007, 2014 and in 2017. Do we see a third high or is this the last for this year? Time is the real judge! The landmark tax overhaul came at the start of July and it’s still creating jitters among the market participants. As most earlier thought, the initial hiccup didn’t seem to surface and seemed to be a smooth transition. The benefit/impact would nevertheless be felt only in the long run, the short to medium term gains would soon rationalize in the long run. Despite some hitches, the new system is in place and certainly needs tinkering which would be carried out by the committee.  The disastrously low bond yields across the world and the insatiable appetite for purchase of assets by the central bankers excepting the US Fed has resulted in deluge of liquidity into equity markets. Excepting the geo-political tensions of Indo-China border dispute and US-N Korea tensions, there isn’t any possible untoward surprises in store. Watch out for these flashpoints for future course on the liquidity movement and the asset allocation matrix. Equity The recent restrictions from the SEBI on ‘shell’ companies have created a chaos in the domestic bourses creating a knee-jerk reaction pulling the mid & small cap indices down. With the earning season not providing any hope, the latest move only provided a good reason for the retracement in the march by the stock markets. We believe a further down side and the disappointing company results could pull back a bit more in the short term and provide an opportunity to enter the market. We recommend continuing staggered entries to equities while taking potshots at dips. Debt The falling CPI and the rate cut by RBI has further diminished the gleam out of bank deposits. The MPC also continued its neutral monetary policy stance monitoring the pain points for possible inflationary cycle. With corporates wobbling in their performance, it’s become difficult to hunt for good bargain in the bond markets. The medium term (5-10yr) govt. bond are at an attractive spread over repo. Investors looking for better returns could explore dynamic bond funds though it would increase the risk profile owing the duration play in these funds. Copyright © Wealocity, All rights reserved. Our mailing address is: dreams@wealocity.com Disclaimer: All the views expressed are strictly personal and we recommend consulting your financial advisor for making any investment decisions based on your risk appetite, timelines and goals.