Motilal Oswal Asset Management Company Ltd. (MOAMC) is a public limited company incorporated under the Companies Act, 1956 on November 14, 2008, having its Registered Office at 10th Floor, Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai - 400025.
Motilal Oswal Asset Management Company Ltd. has been appointed as the Investment Manager to Motilal Oswal Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated May 21, 2009, executed between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset Management Company Ltd.
 
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Interesting Times Ahead for Indian Capital Markets

Blogs Blog Details

Mr. Gautam Sinha Roy

Fund Manager MF

One of the heartening features of the last 12 months for the Indian mutual fund industry has been the fact that inflows into equity funds have been especially good during this time. So much so that in the last 12 months, equity inflows of mutual funds at $15bn equals the total inflows of the preceding Decade (Data as on June 30, 2015; Source: AMFI data, Deutsche Bank Global Research) Such high inflows have amply compensated for weakening of FII inflows off late. Continuation of such inflows would be enormously healthy for the country’s capital markets and incremental capital allocation as flow of capital is essentially the heart of the modern capitalist economy.

While the broader market has been consolidating so far in 2015, we are hopeful that the negative traction in earnings growth that was seen in H2FY15 may start reversing sooner than later. We continue to be enthused by the improvement in several macro factors including global raw material prices (especially crude and metals), low inflation in India and a much improved fiscal situation. The improved macros will ultimately start reflecting in improvements in corporate profitability, which ultimately decides market movement. H2FY16 should mark the much-awaited turnaround in earnings trajectory. Another key trigger for market remains further reductions in the benchmark interest rates.

Also, the sudden burst and subsequent freeze in the Chinese market may be positive for incremental FII inflows into India, as a lot of Asia-Pacific and Emerging market fund flows were earlier getting diverted towards China at India’s expense. Greece is probably headed for an inevitable separation from the European Union, probably for their own good in the long term. Since it is a very small proportion of the overall system, the main risk of such a separation could be the domino effect on other peripheral European counties. The main risk for India hence will be how global capital flows behave after such an eventuality. However, the surge in domestic equity fund flows far overshadows these factors and would also lead to the Indian market reacting more to India specific issues rather than random events anywhere in the globe. Any strong correction in the Indian market post a global shock-event like Gr exit or a hike in US benchmark rate- would be a once-a-decade kind of buying opportunity for investors in Indian equities.

Almost since 2008, India has been seeing a disconcerting trend of increasing share of household savings getting diverted in to gold and in to real estate. We have seen both these asset classes performing badly in the last year or so. Possibly as a direct consequence of that, we have seen some shift in incremental allocation of savings beginning to happen from gold and real estate to more productive investments in equities over the last year.This will be tremendously beneficial for the Indian households’ collective financial future security and wealth creation. We find this trend to be extremely healthy and hope that it continues. This in turn has also started to revive the primary market for equities in India. After a long lull, risk capital is being made available to the country’s entrepreneurs and that too from domestic savers. This may go a long way in reviving the investment side of the economy.

Since cost of capital in India is high, any sharp reductions in interest rates will help kick-start the investment cycle. Sustained low inflation (WPI is negative and CPI hovers around 5%, (Source: MOSL Research; Data as on: June 2015) is a great lead-indicator of this happening eventually. Auction of coal mines and restart of mine productions will also help revive stuck projects in power and metal conversion sectors. We are optimistic that eventual clearance of the land bill will give a much needed fillip to capital formation and expansion.

Moreover,the Indian Government’s financials are in a much better shape than they were a year earlier. This is all due to good control on expenses as well as lower subsidy burden as crude prices are down materially, as well as due to increase in-direct tax collections. The government is likely to use its improved fiscal situation to accelerate investments in public projects.

All these factors portend some interesting times ahead for the Indian capital markets.

Disclaimer: This article has been issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact. The Sectors mentioned herein, if any, is for explaining the concept and shall not be construed as an investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities,losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance may or may not be sustained in future. 

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

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