Equity markets moved sideways in the month of June driven by concerns on high crude oil prices, increasing noises around trade tariffs, weak currency and the Reserve Bank of India’s first rate hike in the past few years.
Risk of significant FII outflows on account of a major global risk off event remains a concern. GST collections have continued to witness a pick up; crude oil prices and GST collections would continue to be key monitorables going forward.
Consumption is expected to remain one of the key growth drivers. Urban consumption has been strong so far, driven by moderate inflation and interest rates. Rural consumption, driven by increasing food prices and revival in sectors such as construction is also expected to see a gradual uptick, resulting in a broad based consumption growth.
In terms of our portfolio positioning, we continue to remain overweight on private sector banks on account of their ability to gain market share and maintain relatively higher growth rates. We are also diversifying exposure to consumption plays across multiple themes.
Long-term structural drivers like demographic advantage, low household debt, limited penetration across different consumer categories, increased potential for financial savings and urbanisation makes India a compelling equity story from medium to long term perspective.
We believe investors would be well advised to invest with medium to long term perspective and systematically increase exposure to Indian equity markets.