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Month of Jan'18 saw Indian markets elevated and driven majorly by positive sentiments from global markets and the better than expected earnings season. While the market participant for the whole of Jan'18 waited for the upcoming events like Union Budget and RBI Policy, better than expected reported earnings made the equity markets rally. Bellwether indices viz. S&P BSE Sensex and Nifty 50 touched all-time highs of 36000 and 11000 respectively. However, the fixed income markets were seen trading volatile for the month leading to hardening of the yields during the month. The fixed income space was burdened down by the expectations that Indian government will overshoot its fiscal deficit target, which may lead RBI to turn more hawkish on inflation. Mixed macro-economic data print and measures taken by the government to increase substantial borrowing to control country's fiscal presented a new vigour to the already choppy markets during the month. Indian markets also cheered with the announcement of real GDP for 2016-17 increasing to a revised print of 8.2% during 2015-16 while the growth during FY17 was unchanged at 7.1%. This gave renewed thrust to the Indian equity markets which made new highs during the month. The month of February 2018 could be a crucial month for the Indian markets. Investors are not expected to get a breather from the slew of economic reports released every month just because February has the fewest number of days.

Market Performance*

The Indian equity markets ended the first month of 2018 on a positive note, surpassing the coveted 36000 and 11000 mark due to the positive sentiments of the market participants on back of better than expected earnings season and positive global cues. Markets were seen in the positive territory as Nifty 50 and S&P BSE Sensex grew 4.72% (M-o-M) and 5.60% (M-o-M) respectively. On the other hand, the mid and small cap were down by 2.57% (M-o-M) and 2.67% (M-o-M) respectively.

IIP^

India's Index of Industrial Production (IIP) surged to 8.4% in Nov'17 showing a sharp acceleration in growth from the 2% in Oct'17 (2.2% originally reported) the highest IIP level since Oct'15 on back of strong performance of manufacturing and capital goods sectors. IIP growth for Apr to Nov'17 slowed to 3.2% from 5.5% in the same period of the previous fiscal. The acceleration was mainly on account of a robust performance by the manufacturing sector.

Inflation^^

The Consumer Price Index (CPI) based inflation for the month of Dec'17 came in at 5.21% (Y-o-Y) as compared to 4.88% (Y-o-Y) in Nov'17, highest in the last 17 months, though it was less than market expectation of 5.5%. Retail inflation growth thus surpassed the Reserve Bank of India's (RBI) medium-term target of 4% but was well within the band of 2%-6%. Retail inflation on a YoY basis edged higher primarily due to base effect and a rise in the prices of food items like vegetables, milk-based products, eggs, meat and fish. Implementation of HRA allowances under the 7th Central Pay commission also weighed on inflation.

Triggers

  • Volatile hovering around commodity prices could put pressure on the global financial markets. The movement of crude oil prices might be closely monitored by the market participants.
  • The state elections which are going to take place in Meghalaya, Nagaland and Tripura would be a key trigger for the Indian stock markets.
  • With current earning season so far being better than expected, one needs to closely track the quarterly earnings going forward and any other unexpected positive results being reported could boost the market sentiments, which in turn, could help in measuring the impact of the recovery phase.
  • Global developments would continue to drive the market movement. Investors would look at the pace of the hike in US and the policies of the other developed and emerging economies in the world.
  • The trajectory of crude oil prices and the movement of Indian Rupee could also be key triggers in the coming month.
  • The government's steps to carry out the recapitalization of public sector banks could be one of the major events to watch out for. It is expected to further strengthen the banking system in the country going ahead.

Source:
* Bloomberg
^ mospi.nic.in
^^ ICRA & RBI
## Ministry of commerce
# Economics times

Disclaimer:
The information used towards formulating the outlook has been obtained from sources published by third parties. While such publications are believed to be reliable, however, neither the AMC, its officers, the trustees, the Fund nor any of their affiliates or representatives assume any responsibility for the accuracy of such information. CRMF, its sponsors, its trustees, CRAMC, its employees, officer, directors, etc. assume no financial liability whatsoever to the user of this document. Mutual Fund Investments are subject to market risk. Investors are requested to read the Scheme related documents carefully before investing.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Jan'18 saw Indian equity markets rallying with the benchmark indices S&P BSE Sensex and Nifty 50 crossing the 36000 and 11000 mark respectively. Positive market sentiments helped markets show positive momentum right from the beginning of the month primarily on the back of better than expected earning session hinting towards the corporate India already leaving all the perils of structural changes like Demonetisation and implementation of GST behind and being ready to build a structurally proficient and a robust economy. Qualitative trends of the results are encouraging and point to on-going economic recovery. Markets also cheered International Monetary Fund's expectation of India growing at 7.4% in 2018 which makes India one of the fastest growing countries among emerging economies. Earnings from GST implementation also improved compared to the previous month at Rs 86,703 crores in Dec'17. The rally in Indian equities in Jan'18 was also helped by the spur in FIIs inflow while the domestic Mutual Fund continued to invest in the Indian equities.

Market Performance**

The Indian bellwether indices viz. S&P BSE Sensex & Nifty 50 remained in the positive territory for the month of Jan'18, grew by 4.72% & 5.60% respectively. Whereas, there was volatility seen in the mid and small cap space. S&P BSE Mid- cap index & S&P BSE Small-cap index were down by 2.57% & 2.67% respectively.

S&P BSE IT, S&P BSE Bankex and S&P BSE Capital Goods were the top performing sectors during the month rising by 11.34%, 7.38% and 6.43% respectively. S&P BSE Power, S&P BSE Auto and S&P BSE Telecom were the major sectors under pressure falling by 2.61%, 3.01% and 11.75% respectively.

Growth`

India's Index of Industrial Production (IIP) rose to 8.4% in Nov'17 compared output growth by just 2.2% in Oct'17. This is the highest IIP level since Oct'15 on back of strong performance from manufacture of pharmaceuticals, medicinal chemical and botanical products along with growth in the capital goods sectors. IIP growth for Apr to Nov'17 slowed to 3.2% from 5.5% in the same period of the previous fiscal. The stepping up of IIP was on back of performance growth in fifteen out of the twenty-three industry groups in the manufacturing sector which have shown positive growth during the month of Nov'17.

IIP^

India's Index of Industrial Production (IIP) rose to 8.4% in Nov'17 compared output growth by just 2.2% in Oct'17. This is the highest IIP level since Oct'15 on back of strong performance from manufacture of pharmaceuticals, medicinal chemical and botanical products along with growth in the capital goods sectors. IIP growth for Apr to Nov'17 slowed to 3.2% from 5.5% in the same period of the previous fiscal. The stepping up of IIP was on back of performance growth in fifteen out of the twenty-three industry groups in the manufacturing sector which have shown positive growth during the month of Nov'17.

FPI Outflows**

The month of Jan'17 saw an inflow by FPIs (Foreign Portfolio Investor) on optimism of pre-budget rally, better than expected quarterly earnings and structural changes for the economy. The net FPI inflow for the month was Rs. 13781 Crs. Domestic Mutual funds also increased their exposure to equities with the net purchase being Rs. 7386 Crs (as on 30th Jan'18).

Outlook

With constant new developments domestically as well as globally, Indian equity markets are expected to experience heightened volatility in the coming future. In the short term, the market participants are expected to take cues from the pending third quarter corporate earnings and will have to evaluate the impact of the global growth trajectory.

Most domestic economic indicators are relatively positive or are showing signs of recovery. Going forward, India is expected to be one of the fastest growing Emerging Market economies the coming year, in absence of any external shocks.

The third quarter earnings season reported robust volume growth across consumption driven sectors like FMCG and cement while strong performances were reported from retail focussed private banks. The season also saw strong operating performances in cyclical companies which lived up to the markets expectations. The continuity of trend observed since the last quarter led to stability in earnings estimates for FY18. The revival in earnings going ahead is expected to be very critical for such valuations to sustain.

The upcoming RBI's policy in Feb'18 will be a key event to judge the near term direction of the interest rates in India. The biggest risks to the direction of the interest rates going ahead could be attributed to the increase in interest rates by the US Fed and consequent strength of the US Dollar. However, India's strong macros will help reduce the impact of the rate hike.

Despite the near-term challenges, the long term potential of Indian economy remains intact. The interim corrections can be used as an opportunity to enter the market by investors having medium to long term investment horizon and should adopt a staggered approach to equity investments in order to even out the market volatility.

Source:
^ MOSPI, ICRA
` Markit
** ICRA MFI Explorer

Disclaimer: The information used towards formulating the outlook has been obtained from sources published by third parties. While such publications are believed to be reliable, however, neither the AMC, its officers, the trustees, the Fund nor any of their affiliates or representatives assume any responsibility for the accuracy of such information. CRMF, its sponsors, its trustees, CRAMC, its employees, officer, directors, etc assume no financial liability whatsoever to the user of this document. Mutual Fund Investments are subject to market risk. Investors are requested to read the Scheme related documents carefully before investing.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

During the month of Jan'18, domestic fixed income markets remained volatile on the expectation of the government likely to overshoot the fiscal deficit target and of a higher retail inflation print in the coming months on the back of elevated crude oil prices. Market participants continued to stay cautious of evolving macro-economic factors and developments domestically as well as globally. Jan'18 saw the Indian 10yr G-sec hardening by 10bps to 7.43% towards the end of the month vis-à-vis 7.33% on 29th Dec'17. During the mid of the month, bond yields plummeted by 16bps and witnessed the significant fall after the government reduced its additional borrowing plan for this fiscal year by more than half to Rs. 20,000 crores from the earlier Rs. 50,000 crores. However, it went up considerably after the economic survey which showed that Indian government's fiscal consolidation could be kept on hold for the current financial year. Globally too, the bond yields continued to remain on upswing on expectations of better growth and rising inflation. During the month, the US bond yields rose by 30bps to 2.71%, awaiting clarity on various policies and administrative framework to be implemented. Brent crude oil crossed $70-per-barrel-mark during the month of Jan'18 amid production cuts from OPEC and Russia and closed at $69.05 per barrel as on 31st Jan'18 with an increase of $2.08 per barrel compared to last month. The impact of this was clearly visible on the petrol prices rose to over Rs. 80 per litre. Indian Rupee saw a fall amid a steady rise in global crude oil prices. INR closed at Rs.63.59/$ on 31st Jan'18 as compared to Rs.63.87/$ as on 29th Dec'17.

Retail Inflation remained under pressure while wholesale inflation slowed#:

Retail inflation surged to a 17-month high of 5.21% in Dec'17 from 4.88% in the previous month and 3.41% in the same period of the previous year. Retail inflation growth thus surpassed the Reserve Bank of India's (RBI) medium-term target of 4% for the second consecutive month. The Consumer Food Price Index also grew 4.96% in Dec'17 from 4.35% in the previous month and 1.37% in the same period of the previous year. Wholesale Price Index (WPI)-based inflation slowed to 3.58% in Dec'17 from 3.93% in the previous month due to moderating vegetable prices which reduced to 56.46% in Dec'17 from 59.80% in Nov'17.

Trade Deficit#:

India's trade deficit expanded to USD 14.88 billion in Dec'17 from USD 13.83 billion in Nov'17. Exports during the month were up 12.36% to USD 27 billion in Dec'17, mainly due to an increase in engineering goods exports. Imports rose by 21.12 % to USD 41.91 billion in Dec'17.

Outlook:

    Due to the increase in US bond yields on the back of awaiting clarity on various policies and administrative framework to be implemented, global markets may continue to remain volatile which could show its effect on domestic fixed income markets for short to medium term.

    On the global front, uncertainty around commodity prices, especially crude oil, may continue to impact the fiscal situation of emerging economies including India. Going ahead, crude oil prices may remain elevated, if not increase further, on OPEC member's commitment to production cuts and improving global growth. However, US oil production has been steadily increasing and as the OPEC curbs near end, oil prices are likely to soften in second half of 2018.

    Domestically, the yields have remained under pressure for past few months due to inflation creeping higher, jump in crude prices and expectations of fiscal slippage. The key factors which could impact the markets yields would be the upcoming monetary policy committee outcome post the Union Budget.

    In the upcoming policy meeting, we expect RBI to remain status quo, though the tone may remain hawkish on fiscal slippage and expectations of higher MSP as enumerated in the Budget. However, the current levels of short term rates look attractive, considering that overnight rate is still hovering below repo rate of 6%. Inflation is likely to peak out at 5% and show a downtrend thereafter. We expect CPI to remain largely near RBI's target of 4% in the short term obviating a need for rate hikes in near term. Further investment cycle is yet to gain a strong foothold, and higher rates may crimp any chances of pickup in growth. Hence from longer term perspective short term funds provide an attractive investment option. Over long term, we expect GST to be beneficial both on revenue side as well tempering inflation. This is likely positive for long term rate movements.

Source:
#MOSPI
^RBI
*MFI Explorer
@Bloomberg
&CAG

Disclaimer: The information used towards formulating the outlook has been obtained from sources published by third parties. While such publications are believed to be reliable, however, neither the AMC, its officers, the trustees, the Fund nor any of their affiliates or representatives assume any responsibility for the accuracy of such information. CRMF, its sponsors, its trustees, CRAMC, its employees, officer, directors, etc. assume no financial liability whatsoever to the user of this document. Mutual Fund Investments are subject to market risk. Investors are requested to read the Scheme related documents carefully before investing.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.