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Here’s what you must know about the week that went by

“In the business world, the rearview mirror is
always clearer than the windshield.”

Warren Buffet

Witnessing a reversal in sentiments, Indian bellwether index Nifty bounced back to a much more favorable level of 11,305 from the previous week’s 11,175-end – up by 1.2%

Key highlights of the week included the following:
-The Union Cabinet raised the dearness allowance to 17% from the previous 12%
This move is expected to cost a total of Rs 16,000 crores to the exchequer and will benefit a total of 50 lakh Government employees and 65 lakh pensioners. This comes in as a surprise as previous increments were in the range of 2 to 3 percentage points.

Expected Impact:
This is the highest ever increase in DA in one go by the central government, we expect this to lend positivity towards the consumption sentiment as the festive season closes in.

– Public sector banks cut lending rates by up to 25 bps.
Banks including Bank of India, Bank of Maharashtra, Central Bank of India, Oriental Bank of Commerce, State Bank of India have reduced lending rates by up to 25 bps following a cut in the repo rate by the RBI last month.

Expected Impact:
With the upcoming festive season, the move is expected to extend the benefit of lower borrowing rates to customers; the auto segment is expected to benefit the most given an already slumped state of sales.
With continually reducing outflows of foreign capital, we can see a reinstatement of faith by the foreign investors and can see them turning strong net buyers soon.
Meanwhile, here are the star fund categories of the week:

return

Here’s how the week’s events reflected in Indian markets

NIfty

We believe corporate earnings will primarily guide market sentiments in the coming week. Hopefully, this earning season will revive domestic investor mood & act as a catalyst in bringing out the bulls in foreign investors.

NFO Alert: Invest in Kotak Pioneer Fund!

kotak NFO

large&midcap

It’s time to invest in this Large & MidCap Fund

The finance ministry’s corporate tax rate-cut gift to India Inc. last weekend was well-received by capital market participants as domestic & foreign investors pumped in the capital in expectation of a spur in the earnings recovery rate. Modi’s visit to the Oval Office is expected to garner positivity for the Indian economy – especially around strengthened trade relations, improved tourism sentiment, and an influx of foreign capital into the home economy.

Having said that, Indian capital markets have been quite resilient in the face of such escalating tensions between two super-economies as it basked in the comfort of an immediate consumption and earnings revival.

Investors are advised to continue investing in a systematic fashion, sticking to asset allocation. If permitted by one’s risk & investment profile, preferences can be skewed towards a large & midcap allocation blend (large-cap orientation) and funds with meaningful exposure to banks, automobiles & IT as sectors.

One such large & midcap fund is “Mirae Asset Emerging Bluechip Fund Direct-Growth.

  • This 5-star rated fund (rated by Morningstar, CRISIL, and Value Research) provides a CAGR of 17.06% (past 5 years), which is 7.59% more than its benchmark (NIFTY Large Midcap 250 Total Return Index @ 9.47% past 5 years) — thus making it the #1 in the Large & MidCap category.
  • This fund provides a perfect blend between large and mid-caps by investing 99.64% in Indian stocks, of which 52.41% is in large-cap stocks, 34.03% is in mid-cap stocks and only 13.2% in small-cap stocks — hence managing the above-average risk it faces.

Check out this fund that delivered 129% absolute returns in the past 5 years!

SBI Small Cap Fund – Direct Plan

★★★★★ (Morningstar Rating)

Ranked #1 in Small-Cap category by last 5Y returns

Return Capacity: High
Risk level: Moderately High
Category: Open-ended and Equity: Small Cap
Last 5 yr returns: 18.05% (as of Oct 04, 2019)
Minimum SIP Amount: Rs. 500

To boost the total returns of your financial portfolios, our Registered Investment Advisor recommends you to take some risk by allocating at least 5-10% of the total portfolio in small-cap funds. SBI Bluechip Fund (rated 5 stars both from Morningstar & Value Research) is the perfect choice for the same.

  • Even though markets are down in past months (causing this fund’s benchmark, S&P BSE Small-Cap, to give 5.19% 5Y returns), SBI Small Cap Fund has yielded an excellent CAGR of 18.05% (past 5Y), which is 12.86% more than the returns of its benchmark.
  • To reduce the risk that comes with equity exposure, the fund is well-diversified between small-/mid-/large-cap stocks (out of its 88.16% investment in Indian stocks, 3.09%/14.55%/67.67% is in large-/mid-/small-cap stocks respectively.
  • Fund manager’s insistence on diligence and long enough time perspectives have helped the fund in delivering consistently high returns with this fund when compared with other funds in the small-cap category.

Subscribe to this hot-selling NFO at Rs. 10/unit!

When a fund house introduces a new mutual fund scheme, it goes by the name New Fund Offer, allowing the firm to raise capital for purchasing securities. One such fund house – Motilal Oswal has launched a New Fund Offer in the large & midcap category – Motilal Oswal Large & Midcap Fund. The category & NFO is expected to benefit from the evolving economic scenarios by way of capturing the uptrend and insulating against headwinds in an optimal fashion.

The fund is suitable for investors having a long-term investment horizon and seeking optimal appreciation across cycles.

Fund Overview:

  • The best part of this NFO is its price for its early investors. Be it the NAV or the exit load, this NFO is the best in its category because the rate at which the NAV is offered is just INR 10/unit and the fund has an exit load of 1% if redeemed within 15 days and none thereafter.
  • The investment objective is to provide medium to long-term capital appreciation by investing primarily in Large and Mid-cap stocks with a targeted ratio at 50:50. However, the AMC may have an underlying philosophy of maintaining at 35:35 with the rest being flexible for allocation between equities and debt. Thus giving you an excellent balance of relative conservatism with great growth opportunities.
  • Given our research team’s primary interaction & understanding with the executives at Motilal Oswal, the fundamentals and philosophy seem well-positioned considering currently evolving market dynamics.

Its simple, be an early adopter, get lower NAVs and achieve higher gains!

NFO

Motilal Oswal Large & Midcap Fund (27 Sep’19-11 Oct’19)

Motilal Oswal has launched a New Fund Offer in the large & midcap category – Motilal Oswal Large & Midcap Fund. The category & NFO is expected to benefit from the evolving economic scenarios by way of capturing the uptrend and insulating against headwinds in an optimal fashion.

The fund is suitable for investors having a long-term investment horizon and seeking optimal appreciation across cycles.

Fund Overview:

The fund will be managed by Aditya Khemani & Abhiroop Mukherjee (star fund managers at Motilal Oswal). The targeted ratio between large & midcap is expected to be at 50:50; however, the AMC may have an underlying philosophy of maintaining at 35:35 with the rest being flexible for allocation between equities and debt. The fund has an exit load of 1% if redeemed within 15 days and none thereafter. Offer NAV at INR 10/unit.

Given our primary interaction & understanding with the AMC, the fundamentals and philosophy seem well-positioned considering currently evolving market dynamics.

Rationale:

The case for large-caps (NIFTY15) remains evergreen as it has known to withstand headwinds and leverage tailwinds effectively while continuing to grow efficiently. The case for large-caps is further strengthened by the current stimulus-orientation with the understanding that such measures will percolate from top to bottom of the market-cap pyramid across sectors.

As far as midcaps are concerned, Midcaps’ relative valuation (P/E) vs. NIFTY is at 2012-13 level lows – also the zone which marked the beginning of the midcap bull rally through 2014. The Nifty Midcap-100 market-cap is currently at a 5-year low with the rolling1-yr differential b/w NIFTY midcap-100 & NIFTY being at a historical extreme. Though there’s a strong case for a revival in the midcap space (albeit by tagging-along with the broader market), quality of stock-selection has become all the more critical within the space. We are confident that Motilal Oswal through its fund management team & framework along with institutional depth has the ability to deliver.

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