March, historically, is not seen as a good month in the calendar with “Ides of March” on the 15th of March, being seen as the most ominous day in the Roman Calendar as Julius Caesar was assassinated on this day.
March 2018 has not been a good month for equity markets with multiple factors affecting markets. IPO’s, LTCG profit booking by investors, PNB Scam fallout, US trade wars and Fed rate hikes all have hit market at once.
The market is now giving an opportunity to buy stocks that can continue to sustain growth and fundamentals.
Majority of the issues mentioned in the above table contain a large component of Offer for Sale by private equity investors and promoters. This component would be eligible for long-term capital gain exemption till 31st March 2018 only. There would be no grandfathering available for them simply because there was no listed price available as on 31st January 2018. Given the whopping amount of Rs. 140.92 billion worth primary issuances this month, money is diverted from secondary markets to the primary markets.
Click here to read our analysis on “Should You Book LTCG Before 31st March 2018 for Gaining Exemption?”
The Sensex & Nifty have fallen by over 6.5% each from 52 Week Highs seen in January 2018. Most of the midcap and smallcap stocks have relatively corrected more than the largecap stocks due to overly stretched valuations, PNB Scam, FIIs sell off (sold Rs. 110 billion worth shares in Feb 2018) and global cues.
However, recently released macro-economic data suggests that the Indian economy is growing at a moderate pace and is not sharply rising inflation expectations. February 2018 CPI inflation at 4.4% is within RBI forecast of 5.1% and IIP growth for January 2018 was solid due to low base effect. Credit growth has increased while SIAM data indicates consumer demand is good. This set of economic data should please policymakers to keep interest rates unchanged in its April 2018 policy meet.
India’s GDP growth for the third quarter of fiscal 2017-18 came in at a growth of 7.2% against 6.5% seen in the second quarter of fiscal 2017-18. The economic activities that grew above 7% in the third quarter of 2017-18 over previous years include manufacturing, trade, hotels, transport, communication and services related to broadcasting, public administration, defence and Other Services. During the month of March 2018, FIIs have turned to net buyers of shares worth Rs.17 billion from net sellers in the month February 2018.
Click here to read our analysis on “India Economic Data Should Please Policymakers – Economic Data Analysis March 2018”.
From above economic data it is evident that Indian economy has recovered from lower levels of growth, which was mainly due to GST implementation and demonetisation. Recovery in economic data (CPI, IIP & GDP growth) will translate to better than expected profits for the companies in Q4Fy18. This multiplier effect will have a positive impact on stocks, which are fundamentally strong and have positive growth outlook. Hence, on this basis, we would recommend our subscribers to invest fresh capital in to our “Strong Core” portfolios.
On the global front, three of the “Big Four” Central Banks, Feb, ECB and BOJ, are slowly starting to converge on the agenda of accommodation removal. Economic data of US, Eurozone and Japan is showing signs of strength and stability, though inflation is still below target levels of 2%. Major indices in US have recovered from lows mainly lead by tech companies.
Click here to read our analysis on “Removal of Accommodation, What it Means for Markets – Global Economic Data Analysis March 2018”.