Equity Outlook
Reliance Mutual Fund
IDFC Mutual Fund
Overweight on:
▪ Consumer facing - Thematic stocks with good profitability and
possibility of sustained growth.
▪ Stocks leveraged to the domestic economy and at reasonable
valuations
▪ Select Large-cap IT stocks – available significantly below historical
valuations.
▪ Increased exposure to Financials, Private , select NBFC’s and select
PSU’s.
▪ We continue to remain over-weight in Pharma due to structural drivers
& favorable currency
Underweight on:
▪Oil & Gas – Both Regulatory and volume growth uncertainty
persists.
▪FMCG – Valuations appear stretched in several pockets.
▪Commodities – remain underweight due to both domestic and
international price & demand scenario.
Overweight on:
▪ We like the consumer businesses, we have seen some moderation in discretionary spend in the recent past. Looking forward in the
current quarter which is the festive season, demand should resurface. Retail credit is showing above average growth rates as also
reflected in the banking sector (retail finance) results– Fundamentally the consumer business still remains consolidated, and
the balance sheets are in no manner stretched.
▪ From a portfolio strategy point of view in the financial services space we are unable to reconcile the deviation in the market caps of the
top 5 banks. We have started allocating money to the state owned banks which we think are at distressed valuation.
WEEKLY ROUND UP
Global update
• China’s securities regulator said that the country will increase the quota for a program that allows investors to raise Yuan
overseas and use the money to buy stocks and bonds on domestic Chinese markets.
• According to the minutes of October FOMC meeting, a number of Fed officials believed that the Central Bank might have
to expand the size of its monthly bond purchase under QE3 next year after Operation Twist expires.
• Fed Chairman Bernanke said that the Central Bank would continue to use the policy tools to boost US economic growth.
He also added that the Fed will take actions to support recovery in a housing market facing wide range of obstacles.
• BoE Governor King said the UK economy might contract in the current quarter and its recovery is likely to be subdued,
thereby prompting officials to keep open the option of further asset purchases to support growth.
• ECB President Draghi said that the Eurozone banks are becoming less dependent on the ECB for funds as the
announcement of its new bond buying program (Outright Monetary Transactions) has helped to calm the financial
markets
• Japan’s Government downgraded its outlook on the economy for the fourth month in a row amidst falling exports and
weak demand. The Cabinet Office has cut its assessment of consumption, investment, corporate profits and the job
market in Japan.
India Update
• India's trade deficit widens to USD 20.9 bn in October. The rise in the trade deficit was mainly on account of a rise in
imports, both in the oil and non-oil component. On a year-on-year basis, exports fell by 1.6% YoY, falling for the sixth
consecutive month amidst weak global macroeconomic situation.
• IIP for September disappoints at –0.4% YoY as against much higher market expectations. Manufacturing contracted after a
brief recovery in August. Contraction in capital goods worsened at –12% YoY as against –3.4% YoY earlier.
• Headline inflation came in at 7.45% YoY in October (as compared to our expectation of over 8% YoY), sharply lower than
previous month’s print of 7.81% YoY. Primary inflation eased, core inflation corrected and fuel inflation showed a down
tick. Going ahead, in the absence of any more increases in administered price components, the fuel index is likely to trend
downwards given expectation of lower global oil prices on weak global growth.
• Index heavyweight Reliance Industries declined as the company reported a further decline in natural gas production from
the KG-D6 gas field.
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