Some food for thought
"When in Rome, live as the Romans do; when elsewhere, live
as they live elsewhere."
—Saint Ambrose (Italian saint, 339-397)
Word for the day
Venal (adj)
Open to bribery; mercenary.
Mid-year review
The first half of year 2019 is coming to an end. It's time to
review the YTD market performance, economic performance and assess if any
change is warranted in market outlook & strategy.
Market performance review
1. Fear remains
the dominating sentiment
Despite many positives, fear had been the dominating sentiment
in Indian equity markets as reflected by the following data:
(i) The benchmark
Nifty has gained ~8% YTD, whereas smallcap (-5%) & Midcap (-3%) indices are
down.
(ii) Overall market
breadth has been materially negative with more than 75% stocks yielding
negative return YTD.
(iii) Domestic mutual
funds and institutions have been net sellers of equity to the tune of Rs.8313cr
YTD.
(iv) Even in Nifty,
where 62% stock are yielding positive return, the divergence in return is huge.
Top gainer Titan is up ~40% YTD, while top loser Yes Bank is down 38% YTD.
2. Global
equities gained, India underperforms
Despite positive flows of Rs55239cr YTD from foreign investors India
has underperformed the global peer.
(i) Despite
widespread fears of trade war and geo political tensions, Chinese equities have
gained ~21% and US benchmark is higher by ~15%. Allaying Brexit concerns UK is
higher by ~10%, and despite severe growth slowdown German equities are higher
by 16%. Compared to this India's Nifty is up ~8%.
3. Bonds rally as
rates are lowered
Interest rates have trended down almost everywhere, leading to a
smart rally in bonds. US benchmark yields breached 2% floor in June. Indian
benchmark yields also corrected ~15% YTD. A record more than $13trn worth of
global bonds now trade at negative yield.
4. Gold and
Bitcoin record smart recovery
Trade war, currency volatility and geo political uncertainties
supported a smart rally in safe haven GOLD and perceived alternative Bitcoin.
Gold has rallied ~11% YTD in USD terms, to reach at highest
level since 2013. Bitcoins have gained a whopping 210% YTD to reach at highest
level since January 2018.
5. USD weakens
marginally, INR gains
A dovish Fed led to a weaker USD, even though trade balance
showed some improvement. On the contrary, India trade balance remained strained
and rate eased but INR still strengthened over 1% vs USD.
6. Crude oil
jumps higher
OPEC resolve to keep supply tight, overcame most issue, leading
crude prices higher by ~19% YTD.
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...to continue tomorrow
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