Monthly Commentary by Fundamental Equity Research

Indian equity benchmarks ended the passing month with a massive gain of over three and a half per cent with key indices settling at 11877 (Nifty) and 40129 (Sensex) levels respectively.

The manufacturing sector activity in September remained unchanged amid subdued demand conditions both domestically as well as externally. The IHS Markit India Manufacturing PMI was at 51.4 in September, unchanged from August and thereby posting its joint-lowest reading since May 2018.

The eight core industries in August contracted to over three-and-half year low of 0.5%, due to the decline in output of coal, crude oil, natural gas, cement, and electricity.

CAD narrowed to $14.30, 2% of GDP, in Q1 FY20, against $15.80 billion in the year-ago quarter, on account of higher invisible receipts and subdued oil prices.

S&P Global Ratings in its quarterly report on the Asia-Pacific region has slashed India’s GDP growth projection to 6.3% for FY20 from 7.1% forecasted earlier, amid the decline in private consumption.

The Reserve Bank sharply cut its economic growth projection for this fiscal to 6.1 per cent from 6.9 per cent earlier, but expressed hope that the growth will recover in the second half of 2019-20.

The Union Finance Minister Nirmala Sitharaman’s stated that the government is giving sector-specific solutions to fight the slowdown in economic growth.

India’s WPI inflation fell sharply at 0.33% in the month of September 2019 as against 1.08% (provisional) for the previous month and 5.22% during the corresponding month of the previous year.

CPI-based inflation jumped to a 14-month high of 3.99% in September as compared to 3.28% in August and 3.70% in September last year.

India’s factory output growth, measured by the IIP, contracted by 1.1% in August. World Bank slashed economic growth forecast for India to 6% for FY20 from its April projection of 7.5%.

India’s services exports rose by 10.4% to $18.24 billion in August in the current financial year. The services exports or receipts were $16.53 billion in the same month of 2018. It was at $19.08 billion in July this year.

We continue our strategy of buying quality management with quality growth-oriented companies to create long term sustainable wealth. We are recommending investors to buy stocks like HDFC, HDFC Bank, ICICI Bank, ITC, HUL.

Author: Mr. Narendra Solanki, Head Fundamental Research (Investment Services), 6th November 2019

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