Equity Market Update – June 2017

Equity Market Update – June 2017

Indian equity markets corrected for the first time in 2017 and were down ~1% in June.

Performance of global equity markets was mixed with Asian indices outperforming the European indices. The table below gives the details of performance of key domestic and global indices.

Performance of key commodities was also mixed during the month, Brent crude being the worst performer down 5%. Lead and zinc were up 8% and 6% respectively.

INR depreciated marginally by 0.1% against USD in June and closed at 64.6, INR has appreciated by 5.2% between December 16’ and June 17’.

FII’s bought Indian equities worth $0.6bn in June. Net inflows in domestic equity oriented mutual funds in May were ~Rs 16,000 crores. The chart below gives the net monthly inflows in equity oriented mutual funds for last 12 months:

During the month few states announced farm loan waiver and 12 large stressed accounts were referred to National Company Law Tribunal (NCLT). May CPI came in at a record low of 2.2% and 4QFY17 CAD came in at 0.6% of GDP.

Equity market have lagged nominal GDP growth for several years now. Profit growth is now improving and earnings growth for next 2-3 years is expected to be strong (Bloomberg consensus NIFTY EPS growth – 16% in FY18 and 22% in FY19). NIFTY 50 is currently trading at ~14.9xFY19E EPS which is reasonable in a low interest rate and strong earnings growth environment. In our opinion therefore, there is merit in increasing allocation to equities (for those with a medium to long term view) and to stay invested.

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