Bulls are buying, bears are buying – are you?

Appears that the bulls are back firmly this time – even the one residing abroad. FIIs retained their interest on the back of positive corporate earnings and perceived opportunity in the Indian market. We witnessed constant buying from FIIs this week, which remains the primary reason for sustenance in the uptick.

bull and bear

Key Happenings in the week that went by

Bumper opening for IRCTC:
IRCTC listed with a bumper gain of 100% and closed with an increase of 129%. This is so far the best gain of any PSU IPO and surpassed the 94% listing gain offered by Power Grid Corporation on its listing.

It implies the investors’ interest in the equity market and their bias towards quality and fundamental strength. From the government’s perspective, this precedent can be expected to aid further divestment measures.

What’s in for the investor here:
Strong divestment will help the government ease fiscal deficit which is expected to eventually translate to improved spending on infrastructure.

Strong corporate earnings

HUL Q2 profit increased 21% YoY to Rs 1,848 crore; announces Rs 11 dividend per share owned
Hindustan Unilever reported a net profit of INR.1,848 crore, a YoY rise of 21%.
If we will exclude the corporate tax benefit, the profit figure may come to ~INR.1,832 crore.

Country’s second-largest private sector bank HDFC bank has reported a YoY rise of 26.7% in net profit
Profit after tax for the quarter increased to INR.6,345 crore against INR.5,005 crore earned in the same period last year.

Reliance Industries posts record INR.11,262 crore profit in September quarter
Reliance Industries reported a net profit of INR.1,848 crore, a YoY rise of 18.35%. It became the country’s most valuable company after its market capitalization on market value touched INR.9 lakh crore. Notably, this is the only Indian company to achieve a market cap of such magnitude.

Possibilities of Brexit deal
Britain secured a Brexit deal with the European Union on Thursday, more than three years after the Brits voted to exit the bloc
The deal, however, needs final ratification of the British Parliament, which is a contingent event. Possibilities exist that if the deal may not get the parliamentary nod; in such a case the EU may extend the timeline.

Life ahead – at least in the near term
Indian equities are currently playing catch-up and the sentiment is likely to percolate to stressed sectors. Small and Midcaps are likely to witness buying interest. India’s two respected mammoths & index heavyweights – Reliance Industries and HDFC Bank’s quarterly results will set the ball rolling. Markets witnessed buying from FPIs and DIIs on improved sentiments and better prospects going ahead for the economy and we expect this uptick to sustain till the end of Christmas, at least.
Hence, investors may deploy fresh funds at current levels keeping in mind appropriate diversification and individual risk-taking abilities.

Star Fund

Key Mutual Fund News:
SEBI has accepted AMFI’s graded exit load recommendations for redemptions in liquid funds ; one day holdings would draw an exit-load of 0.007%, two days would lead to 0.0065%, three days would lead to 0.0060%, followed by 0.0055%, 0.0050%, 0.0045% till the sixth day; seventh day onwards there is no exit-load. This will be effective from the 20th of this month.

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Festive Offer: Buy gold with as low as Rs.1000

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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.

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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.

Long story, short. Your portfolio & the week that went by!

Markets have corrected to a new low
“Oh no! It’s time to go!”

Markets have touched a new high
“It’s too expensive to buy!”

There may be a hundred reasons to not;
But it takes just one to escape the rot.

Sadly though, there is no reason adequate
for the fence-sitters choosing to simply wait.

The week and the month ended on an ecstatic high. NIFTY clocked a gain of over 7.5% only in the past six days while Sep’19 ended with month-over-month growth of 4.5% as the index reclaimed the 11,500-levels.

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 influx of foreign capital into the home economy.

However, as the month wrapped, President Trump once again featured in global headlines as reports of progressing impeachment proceedings materialize coincided with his offensive strike against China which included announcing an intent to delist all China-based companies off the U.S. stock exchange.

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 imminent consumption and earnings revival.

Here’s how the past week looked like:

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.