Election results around the world don't seem to be following the trajectory predicted by political analysts. One of the most important events - the US Presidential election is behind us. Contrary to predictions, Donald Trump's re-election as President of the United States has stirred both optimism and apprehension in global financial markets. His administration's policy agenda is focused on tax cuts, trade protectionism, deregulation, and stricter immigration policies. Though it is early to assess the implications for the economy and equity markets, but the world eagerly awaits 20th January, the day he officially begins his second term.

Assembly elections in key states of India also exhibited political dynamism. State election results for Haryana and Maharashtra surprised most. The BJP-led Mahayuti alliance's victory in Maharashtra with a decisive mandate, securing over 200 seats in the 288-member assembly and BJP on its own crossing the majority mark in Haryana, retaining power for the third consecutive term, signals consistency in economic policies and political stability. Both these outcomes were welcomed by the markets.

Mr. Sanjay Malhotra took charge as the 26th Governor of the Reserve Bank of India (RBI). In his first public interaction as the central bank's new head, he promised to focus on restoring trust, promoting growth, and ensuring policy stability.

The RBI, in its recently concluded monetary policy meeting, reduced the cash reserve ratio (CRR) by 50 basis points to inject liquidity into the banking system but kept the benchmark repo rate unchanged at 6.5 per cent to combat inflation. RBI also lowered its projection for GDP growth in FY25 from 7.2 per cent to 6.6 per cent. India's retail inflation moderated in November to 5.48% compared to 6.21% in October, led by lower vegetable prices.

For Q3, we expect growth to be closer to 6.25%- 6.50% against the RBI's expectation of 6.90%. Growth is mean reverting to the pre-Covid rate of 5.75%. We see 75-100 bps easing in this cycle. Local conditions pave the way for easing monetary conditions, but external stability might push rate cut to April 2025 instead of Feb 2025 given the uncertainty associated with Trump policies.

For Fixed Income, we remain constructive on duration. Investors with more than 1 year of investment horizon can add duration to their portfolios through corporate bond fund and investors at the short-end of the curve having over 1 month duration can look to switch to one bracket (Money Manager, Low Duration and Floater funds) higher, given the kink available in the curve from 3 months to 1 year.

For equity investors, we advise customers for a disciplined investment approach through SIP/STPs and asset allocation with large cap bias. For long-term wealth creation, patience and realistic expectations would help through such times in equity markets.

To cater to the needs of our customers in a dynamic market environment, we endeavour to build innovative Active, Passive and Alternate investment solutions. In Debt Passive space, we launched the industry first Aditya Birla Sun Life CRISIL-IBX Financial Services 3 to 6 Months Debt Index Fund, which invests in CP (Commercial Papers), CD (Certificates of Deposits) & Bonds of AAA-rated issuers from the financial services sector. It is a perpetual index fund which starts with 6 months maturity profile and rolls down to 3 months, resetting to 6 months after every roll-down period. Our endeavour is to provide investors with various investment avenues that optimally leverage the current market conditions, making their money work.

In the new year we aim to come up with another industry first proposition in the perpetual index fund category capturing another spot in the yield curve, offering both term premia and superior portfolio quality.

To further enhance our passive offerings, we recently opened the Aditya Birla Sun Life BSE India Infrastructure Index Fund and the Aditya Birla Sun Life Nifty India Defence Index Fund.

In the actively managed equity fund space, post the success of the Aditya Birla Sun Life Quant Fund, we curated another offering for our customers - The Aditya Birla Sun Life Conglomerate Fund, a fund that invests in the top conglomerates of India. The fund covers prominent business groups across 22 sectors, representing 169 companies, and aims to capitalize on their resilience and growth potential.

The diverse needs of customers and the growing wealth effect in India makes it pertinent for asset managers to adapt to these and curate solutions that address the different wealth creation opportunities that investors are seeking. Our 'Customer First' approach helps us innovate and pre-empt customer needs and be present across these asset classes and provide the relevant solutions.

As we step into 2025, I extend my heartiest wishes to you and your entire family. May the upcoming year navigate you towards health and wealth consciousness, leading to what we all want to eventually attain – peace of mind.

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