Global equities witnessed one of its worst months in August, 2019 on the back of significant negative headlines on India’s economic slowdown and US-China trade war.
India’s Q1FY20 real GDP growth at 5.0% YoY (a 6-year low) came significantly below consensus expectations of 5.7%. There is now a meaningful downside risk to the RBI’s forecast of 6.9% real GDP growth for FY20.
The government is responding with the Finance Minister’s announcement of several measures to address growth concerns and improve business sentiment.
The Reserve Bank Of India (RBI) also continued its interest rate cut policy by an unconventional 35bps cut, adding up to 110 bps in CYTD19. There is a possibility of additional 60-75bp easing in this cycle with another cut at the next review in October.
Overall, the risk-reward seems to be fairly balanced with Equities with valuations having the potential to offer reasonable returns to long-term investors.
Select themes that we are participating in are Consumption (i.e. Consumer and Consumer Discretionary) and Financials (i.e. Private Banks, Corporate Banks and select NBFCs), and Industrials (i.e. Capital Goods).
(Source: ABSLAMC Research, Bloomberg)
Aditya Birla Sun Life Balanced Advantage Fund (An open ended Dynamic Asset Allocation fund):
During the month, added a pharmaceutical company, Indian financial services company and an alcoholic beverages company. Increased weight in a consumer goods company and a natural gas distribution company. Current overweight Cements, Pharma & Metals and underweight Energy, IT and Auto.
Aditya Birla Sun Life Focused Equity Fund (An open ended Large cap Equity Scheme investing in maximum 30 stocks):
Continue to increase weights in Oil & Gas sector. Added an Indian cement company to the portfolio. Currently Overweight on Pharma, Construction while Underweight on Energy, IT and Auto.
Aditya Birla Sun Life Equity Advantage Fund (An open ended equity scheme investing in both large cap and mid cap stocks):
Overweight on Financials, Industrials and Cement while being underweight on IT, Auto & Energy. Continue to add exposure to an Indian hospital chain and exited consumer electrical equipment manufacturing company. Also reduced exposure to a retail chain and a private bank.
All the Data mentioned above is as on 31st August 2019.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.