HDFC Bank Research Weekly Equity Market Updates for week ended May 17, 2024
Domestic Equity Market Update
• Indian equities ended the week# on a positive note, with the Largecap oriented S&P BSE Sensex and
Nifty 50 ending higher by 1.85% & 2.03% WoW respectively. The S&P BSE Midcap index ended
higher by 5.01% and the S&P BSE Smallcap index ended higher by 5.47%.
• On the S&P BSE sectoral front, the top gainers were, Capital Goods, Realty & Power. In contrast
FMCG underperformed the most.
• Indian equity indices ended higher for the week, following an ease in domestic retail inflation data,
which fell to 11 months low of 4.83% on an annual basis in April 2024, and with corporate earnings
gradually improving.
Global Market Updates
• US stocks ended the week on a positive note, after the Labor Department released a report indicating
that April 2024 consumer prices in the U.S. increased by 0.3%, a somewhat smaller amount than
anticipated, increasing the likelihood that the U.S. Federal Reserve will lower interest rates later this
year.
• European equity markets fell due to some disappointing earnings that hurt the sentiments.
• Brent crude price rose from USD 82.79 per barrel to USD 83.69 per barrel on prospects of rising
demand from China after the government indicated stimulus measures for the current fiscal.
Key Macro Data & Domestic News Released During the Week
• As per data from MoSPI, India's industrial production growth moderated to 4.9% YoY in March 2024,
slower than the 5.6% YoY in February 2024.
• As per data from MoSPI, as many as 449 out of 1,873 infrastructure projects worth Rs 150 crore and
above were hit by cost overrun of more than Rs 5.01 trillion in March 2024. Another 779 projects were
delayed.
• According to CII, its business confidence index touched a 12-quarter high in Q4 FY24, with 51% of
firms expecting capacity utilisation of 75% and above. 71% expect an improvement in private capex
in H1 FY25 compared with H2 FY24.
• According to Moody's Ratings, the Indian economy is projected to expand by 6.6% YoY in FY25 and
6.2% YoY in FY26.
• As per data from the Ministry of Road Transport and Highways, it continued with front-loading of capital
expenditure as it spent over Rs 545 bn for building new highways in April 2024 despite being slow on
award of projects in H2 CY23.
• As per data from the Society of Indian Automobile Manufacturers (SIAM), car sales in the local market
rose 1.3% YoY to 335,629 units in April 2024.
• According to the UN’s World Economic Situation and Prospects as of mid-2024, India's economy is
forecast to expand by 6.9% YoY in CY24 and 6.6% YoY in CY25, mainly driven by strong public
investment and resilient private consumption.
• According to the Federation of Indian Export Organisations (FIEO), India's merchandise exports are
expected to increase by USD 60-70 bn to USD 500-510 bn by the end of FY25.
• From Nifty 200 universe, 157 companies have announced their Q4FY24 earnings thus far. At an
aggregate level, Sales, EBITDA and PAT have grown by 10.00%, 9.20% and 21.37% YoY,
respectively. Excluding Financials, Sales, EBITDA and PAT have grown by 7.41%, 6.87% and 21.75%
YoY respectively.
Outlook
Going forward, Indian equity markets are likely to be driven by incoming macro data points, Q4FY24
earnings data, development related to general elections and FPI flows. Indian equities could see volatility
if the result of the elections are against general market perception.
US Economy is seeing resilience with the PMI data stabilising while the employment data remains strong.
With April’s CPI report showing lower than anticipated rise, expectations of 2-3 rate cuts by the US Fed in
CY24 are again rising.
In India, the market continues to expect domestic driven sectors across the board to outperform in the
medium term, led by an improving capex cycle and steady demand conditions. Most of the macro data in
India remain quite strong, suggestive of continued traction for corporate earnings. In the interim budget the
government has pushed its Capex spending estimates for FY25 by 16% YoY to INR 11.1 trillion (FY25
Budget Estimates vs FY24 Revised Estimates). This is likely to support the ongoing investment activities in
the economy. Equity valuations in many cyclical sectors have gradually moved into the higher end of the
fair value zone, yet they continue to move higher on expectation of longevity of their growth trajectory. The
run up to the elections and its result seems to have become the biggest near-term event to impact the
market sentiments. Q4FY24 results have started in the muted note and the performance of the companies
would determine the market upsides in the near term. The differential between earnings performance may
see a gradual narrowing in the number of outperforming stocks in the equity market. Capital Goods,
Pharma, Oil & Gas and Power sector have outperformed most in terms of PAT growth.
In terms of valuations, the Largecap indices seems to be relatively reasonably valued than the Smallcap
and Midcap indices, despite the recent correction. Overall, the valuations across the board are relatively
high. Asset allocation rules should be adhered to strictly at this time in the market and the investors should
lower their return expectations from the equity markets as the returns witnessed in the past couple of years
may not be repeated in the medium term.
Investment deployment strategy could continue to be at 40% lumpsum and rest 60% to be staggered
over the next 5-6 months. Investors can look to focus on categories like Largecap, Flexicap,
Multicap, Equity Hybrid and Multi-asset funds. In the Smallcap/ Midcap segment, investors could
use large dips to invest, given the rich valuations. All allocations should be done in line with the
risk profile and product suitability of the investor.
Note: Data as on May 17, 2024. Returns less than 1 year are in absolute % terms, whereas returns above 1 year are in CAGR terms.
Data has been sourced from ICRA Analytics Ltd. (For Disclaimer of ICRA Analytics Ltd, refer to https://icraanalytics.com/home/disclaimer)
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Market Return data calculated based on 18th May closing price as markets were open on Saturday.
Overview - Fixed Income Markets & Mutual Funds as on 17 May 2024
• Domestic G-Sec prices closed the week ended 17th May on a positive note wherein the yield on the 10-year
benchmark, the 7.10% G-Sec 2034 bond, fell by 3 bps to close at 7.05% as against 7.08% on 10th May 2024.
• In case of AAA rated corporate bonds, yields in the less than one-year segment was mixed in the range of (-)5
bps to 2 bps on a WoW basis. In case of greater than one-year segment, yields were mixed in the range (-)1 bps
to 2 bps on a WoW basis.
• Movement in G-sec yields: -
o Indian G-sec yields fell as domestic inflation for April 2024 came in lower than the previous month. Yields fell
further tracking the fall in US Treasury yields ahead of the US inflation report. However, profit booking by the
market participants kept the pressure over the yields.
o The total G-sec supply for the week stood at Rs 375 bn (SDLs + G-secs). In this, the G-secs’ auction was to
the tune of Rs 310 bn and the maturities were in the range of 10-40 years. For the 10-year G-sec, the average
cut off yield came in at 7.05%. The SDLs’ auction was to the tune of Rs 65 bn and the maturities were in the
range of 8-25 years. The G-secs’ auction was for the following: 7.10% GS 2034, and 7.34% GS 2064.
o Banking system liquidity improved during the week, wherein liquidity, as measured by the RBI’s net Liquidity
Adjustment Facility (LAF), stood at a daily average deficit of ~Rs 1.23 trillion during the week as against a daily
average deficit of ~Rs 1.39 trillion during the previous week.
• Macro Data released during the week:-
o India’s inflation eased marginally to 4.83% YoY in April 2024 compared with 4.85% YoY in March 2024, as food
inflation inched higher owing to high vegetable and pulses inflation. Food inflation increased to 8.7% YoY in
April 2024 compared with 8.5% YoY in March 2024.
o India's wholesale price index (WPI)-based inflation accelerated to a 13-month high of 1.26% YoY in April 2024
as against 0.53% YoY in March 2024 and market expectations of 1% YoY.
o India's merchandise trade deficit widened to USD 19.1 bn in April 2024 as against USD 15.6 in March 2024
and USD 14.44 bn in April 2023 due to surge in gold and oil imports. Merchandise exports inched up 1.06%
YoY to USD 34.99 bn, while imports grew 10.3% YoY to USD 54.09 bn in April 2024.
o As per the RBI, India's foreign exchange reserves rose by USD 2.56 bn to USD 644.15 bn for the week ended
May 10, 2024. Foreign currency assets (FCA) increased by USD 1.49 bn to USD 565.65 bn.
• Other macro-economic news: -
o The RBI bought back Rs 20.69 bn worth of government bonds, against the notified amount of Rs 600 bn as
market participants refused to sell the securities at a loss. The RBI had received offers totalling Rs 405.95 bn
for the following securities - 6.18% GS 2024, 9.15% GS 2024, and 6.89% GS 2025.
o According to the NSSO, the unemployment rate for people aged 15 years and above in urban areas declined
to 6.7% YoY in Q4 FY24 from 6.8% YoY in Q1 FY23. The rate was 6.5% YoY in Q3 FY24.
o As per the RBI, India's domestically held gold reserve surged by 40% between March 2019 and March 2024.
Total gold reserves saw an uptick of 34% during the same period. As of March 2024, the RBI held a total of 822
metric tonnes of gold, with 408 metric tonnes held within the country.
• Global Updates: -
o US CPI increased by 0.3% MoM in April 2024 as compared to 0.4% MoM in March 2024.and market
expectations of a 0.4% MoM. Core CPI rose by 0.3% MoM in April 2024 after climbing 0.4% MoM in March
2024, matching economist estimates.
o As per data from Eurostat, the Euro area GDP grew 0.3% QoQ in Q1 CY24, reversing the 0.1% QoQ falls each
in Q3 and Q4 CY23.
o China’s CPI inflation grew 0.3% YoY in April 2024 from the 0.1% YoY rise seen in March 2024. PPI inflation
remained a point of weakness, falling 2.5% YoY in April 2024 from a drop of 2.8% YoY in March 2024.
o China's finance ministry plans to start raising 1 trillion yuan (USD 138 bn) in long-awaited, long-term special
treasury bonds to raise funds it will use to stimulate key sectors of its flagging economy.
• Outlook: -
The RBI is keeping the banking system liquidity tight in order to keep the call money rates around the repo rates. The
RBI is likely to remain nimble in liquidity management and continue using tools like VRRR or VRR to manage liquidity.
Additionally, the buyback of G-secs and reduction in T-Bills issuances are likely to infuse liquidity into the system.
Inflation remains almost steady at 4.83% YoY in April 2024 as food inflation continues to remain elevated. The
elevated food inflation, esp., the prices of vegetables, cereals and pulses, remain a cause of concern. Furthermore,
the heat waves may keep upward pressure on perishable items; this along with the seasonality may lead to an uptick
in inflation in the coming months. The uptick in commodity prices also poses a threat to the inflation. Nonetheless, as
the monsoon is likely to be better in FY25, there could be some disinflationary pressure on the food price in the
medium term. Also, the downward revision in the RBI's inflation forecast suggests that inflation is likely to ease in the
long term. The moderation in US CPI print in line with the market expectations and weakness in retail sales have
increased the expectations of rate cut by the US Fed in September 2024. Domestically, the bond yields in India have
continued to cool, following stable inflation numbers. In the medium term, the market is likely to take cues from the
US market, the flows related to the JP Morgan bond index inclusion, and the liquidity measures of the RBI. The trend
of food inflation, the forecast of the upcoming monsoon and heat waves, and geopolitical tensions are also likely to
affect the domestic G-sec yields due to their effect on inflation. The Indian G-sec yields are expected to continue to
move in a range with a declining bias due to favourable supply-demand dynamics, and fund managers who can
navigate the volatility and play duration are likely to generate substantial alpha. With the G-sec yields rising in the
mid to longer end, investors who are comfortable with volatility and have a longer horizon of 24 months and above
can take exposure to Dynamic Bond Funds and Gilt Funds to play the improved fiscal deficit dynamics. Corporate
Bond Funds continue to look like a safe bet at the current juncture for investors looking to invest in shorter-tenure
funds. Hence, investors can look at Corporate Bond Funds and Short duration funds for a horizon of 15 months and
above. For a horizon of 3 months and above, investors can consider Arbitrage Funds. Whereas for a horizon of up
to 3 months, investors can consider Overnight Funds and Liquid Funds. Investors can also look at Multi-asset
allocation funds for a horizon of 36 months and above. Investors should invest in line with their risk profile and product
suitability.
Category Average Returns as on 17 May 2024
Annualised Returns * 1 Day 1 Week 1 Month 2 Month 3 Months 6 Months 9 Months 1 Year 2 Year 3 Year
Overnight Funds 6.49 6.42 6.40 6.49 6.48 6.61 6.69 6.68 6.21 5.22
Liquid Funds 7.20 7.30 6.51 7.33 7.35 7.27 7.18 7.13 6.59 5.50
Floater Funds 6.10 9.59 7.76 7.46 8.02 7.56 7.38 7.46 6.87 5.60
Low Duration Funds 6.22 7.61 6.43 7.36 7.55 7.13 6.96 6.92 6.46 5.51
Money Market Funds 6.05 6.99 6.05 7.48 7.66 7.32 7.17 7.13 6.67 5.55
Ultra Short Duration Funds 6.84 6.85 6.02 7.20 7.32 6.98 6.85 6.81 6.32 5.31
Banking And PSU Funds -2.11 12.53 8.51 6.25 7.15 7.34 7.10 6.47 6.43 5.09
Corporate Bond Funds -2.93 12.44 8.78 6.45 7.32 7.36 7.11 6.55 6.53 5.06
Medium Duration Funds -9.65 11.20 8.92 5.65 6.62 7.41 7.09 6.15 7.09 5.84
Short Duration Funds -2.37 10.80 8.29 6.35 6.95 7.14 6.94 6.33 6.46 5.44
Medium To Long Duration Funds -26.25 17.14 12.51 5.00 5.98 7.96 7.22 5.62 6.60 4.90
Long Duration Funds -37.56 20.84 17.54 4.58 5.42 11.32 9.74 6.19 8.36 4.79
Dynamic Bond Funds -29.75 16.63 12.91 4.73 5.89 8.36 7.56 6.25 6.70 5.23
Credit Risk Funds -6.98 7.12 7.44 5.97 7.14 7.25 8.02 7.46 7.15 9.22
Gilt Funds / Gilt Funds with 10 year constant
-34.77 18.74 14.58 5.19 6.09 8.88 8.03 6.31 7.03 4.82
duration
Conservative Hybrid Funds 41.40 42.17 16.45 12.60 9.32 13.74 12.40 12.11 10.09 8.59
Index Funds -0.93 12.71 9.44 6.39 7.05 8.09 7.58 6.41 6.99 5.03
Arbitrage Funds 34.24 10.57 6.70 7.99 7.50 7.71 7.51 7.47 6.36 5.41
* Return figures for all schemes are Annualised for < 1 year and Compounded Annualised for >= 1 year
Recommended Funds' Average Returns (% Annualised
1 Months 3 Months 6 Months 1 Year 2 Year 3 Year
Returns)
Medium to Long Duration Funds & Long Duration Funds 12.71 6.50 8.44 6.06 7.10 5.97
Dynamic Bond Fund 14.15 5.57 8.72 6.64 7.08 5.28
Gilt Funds & Gilt Funds with 10 year constant duration 15.24 6.29 8.73 7.03 7.68 5.76
Short Duration / Medium Duration 8.15 7.39 7.57 6.92 6.85 5.87
Banking and PSU Funds 8.78 7.33 7.31 6.82 6.69 5.46
Corporate Bond Funds 9.17 7.82 7.71 7.22 7.07 5.64
Ultra Short Duration Funds /Low Duration / Floater Funds 6.58 7.90 7.50 7.40 6.93 6.21
Money Market Funds 6.29 8.06 7.67 7.48 7.02 5.86
Liquid Funds & Overnight Funds 6.54 7.46 7.37 7.20 6.66 5.56
Arbitrage Funds 6.86 7.78 8.04 7.81 6.80 5.85
Please Note that all the Dividend options factor in the taxation applicable for corporates
Return figures for all schemes are Annualised for < 1 year and Compounded Annualised for >= 1 year
Returns shown in the chart above are for growth options.
Source for entire data stated above is Accord Fintech Pvt Ltd
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