28-09-2020
Weekly market review by Hemant Kanawala, Head - Equity, Kotak Mahindra Life Insurance Co. Ltd.
Insurance AlertssWeekly market review by Hemant Kanawala, Head - Equity, Kotak Mahindra Life Insurance Co. Ltd.
Global cues; damp flows drag market down
Over the last week, markets suffered strong reversal with Nifty and Nifty Midcap 150 indices returning -4.1% and -5.9% respectively. Weakening global cues – fear of lockdowns in UK, Spain and other European markets, amid increasing fear of COVID re-infection rates, damped the markets. The result was seen in flows as well with Foreign institutional flows standing at USD 18 mn during the last week. Domestic flows didn’t help matter either, with a outflow of ~USD 139 mn during the same time period. The strong reversal is pushing the market to reasonable levels, trading with a P/B of 3.1x as against a long term average of 3.5x.
On macroeconomic front, global market seems to be gripped by fears of resurgence in covid cases and receding hope of a Congressional agreement on further economic stimulus ahead of the acrimonious US Presidential election. The risk off sentiment has led to a rally in US Dollar to a two month high and concomitantly falls in gold prices. On domestic front, the government is expected to announce the borrowing calendar for the second half and RBI will announce its monetary policy decision on 1st October. It is anticipated that Monetary Policy Committee to hold rates amid still high headline inflationary pressures.
IT and Pharma stand out; Telecom and PSU banks suffer
IT (0.2%) and Pharma (0.0%) displayed their defensive strength in a correcting market, while Telecom (-11.2%) and PSU Banks (-9.6%) were the worst affected. Telecom say strong contraction due to increasing competitive intensity after the launch of new post paid plans by Reliance Jio.
Exhibit 2: IT and Pharma stand out amid market reversals
Exhibit 3: Nifty P/B ratio shrinks to attractive levels
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