The retail growth continues to remain strong : Sanjay Dongre, UTI MF

The stock market remains under pressure given a confluence of domestic and global factors. Global economic slowdown, declining global yields, fiscal issues and geopolitical tensions are among the various challenges faced by investors. At the current Nifty level of 11000, market is quoting at 17 times one year forward earnings which is slightly higher than the average valuations of the last 5 years, says Sanjay Dongre, Executive Vice President & Sr. Fund Manager, UTI AMC

Near-term outlook on stock market

Several challenges are being faced by the Indian markets in the short term. Global economic growth is slowing down as the trade war between US and China coupled with the waning impact of fiscal stimulus in the US economy is leading of lower growth in the US economy. Growth concerns are weighing down the central banks across the globe rather than inflation concern leading to dovish outlook by the central banks. Yields are coming down across the markets. In addition, geopolitical tensions may lead to volatility in the crude oil prices. This in turn may impact the currency.

Q1 earnings season

Till now, the reported earnings for 1QFY20 has been below the market expectations. Slowdown the consumption and in the broad economy is clearly reflected in the earnings reported so far. Auto sector continues to face challenging environment with companies reporting decline in the volumes and higher inventory in the supply chain. Deal wins and pipelines in the IT sector remains encouraging while margins pressures are clearly visible in the quarterly earnings. Though the volume growth reported by the consumer companies have been stable, their commentary for future demand indicates weakness particularly on account of stress emerging in the rural economy. Private Banks results indicates moderation in the corporate loan growth. But the retail growth continues to remain strong. Asset quality trends have been mixed with credit cost continues to remain high.

Trend in Equity mutual fund inflows

Historically, the retail investor used to get excited when the market had rallied to higher levels of valuations and used to shun the market whenever there is big drop in the market and market used to quote at lower than average valuations. Now the Indian retail investor has achieved a sense of maturity after witnessing rise and fall in the market in the last 20 years. Indian retail investor has realized the fact that the equity as an assets class gives higher return than any other asset class in the long term. Indian retail investor has truly understood the Warren Buffets principal “Be fearful when others are greedy and Be greedy when others are fearful’. Hence the surge of inflow from the retail investors even in the weak market is best thing that has happened to the Indian stock market in the last three years. We may witness sustained inflows from Indian investors.