Dear Advisory Client,
The month of January 2019 saw high volatility in markets driven by many factors both domestic and global. On the domestic side, corporate earnings season started with IT major TCS delivering strong performance in a traditionally weak December quarter but other IT company results were mixed, showing that businesses with right strategy and execution ability are the ones delivering in this market. Auto companies showed weak trends with Maruti showing slowdown in growth, largely due to higher insurance costs and cost of credit to buyers. Financials showed a mixed bag with big banks sounding optimistic on NPA’s coming off while NBFC’s are facing the stress of liquidity freeze. Aviation showed continuance of market leadership by the market leader. FMCG showed volume gains for HUL indicating a still strong consumer market in the rural areas.
Globally, tech majors faced slowdown in China but are optimistic of a better future once the trade war eases. Chip majors faced slowdown on a static mobile market. There were both optimism and pessimism across sectors of the global economy indicating various trends that will drive markets going forward.
On the macro front, on the domestic side, inflation was down and so was industrial production and export growth was muted. The interim budget had the farmer and middle class in mind with income support and tax sops respectively.
On the global front, data was largely weak except from the US and economic growth forecasts have been revised down. China has led the slowdown being the largest consumer in the world.
In all this, elections are approaching wth May just 3 months away. Markets are reacting sharply to any issues including pledged shares (Zee), NBFC liquidity (DHFL) and weak corporate results. Positives have largely been ignored. The market is a buyers market where sellers are in abundance and buyers can pick and choose the stocks they want to have in their portfolios.
The market is not a sellers market and while volatility does cause nervousness, stocks with good growth prospects should be held and if possible added on at lower levels. However, there is no rush to buy any stock even if its fallen sharply , as it can disturb portfolio weights and also cause fresh nervousness given expected increase in volatility on elections.
Pick and choose stocks that have fallen in valuations and buy in a staggered manner if weights and cash flows permit. Otherwise stay tight and hold on to your portfolios.