Equity markets in August 2019:
- Equity markets have been weak since early June 2019 and the weakness persisted into August 2019. The Nifty closed, down 1.3% and Nifty midcap down 2% for the month.
- The weakness in the markets was due to a combination of the weakness in the Indian economy, disappointment over some tax provisions in the budget and a continuing global trade crisis.
- The S&P 500 (US Markets), in rupee terms, on the other hand, has been doing better than the Indian markets partly assisted by the weakness in the Rupee.
Debt markets in August 2019:
- Median returns of the Top 10 liquid funds averaged at 6.2%, down from the past year as interest rates have been coming off.
- Government bond yields have been coming off sharply, with the 10 year government bond yields trading close to 6.4%. As interest rates reduces, borrowers benefit and it is good for the economy. On the other hand, investors should expect lower rates on their fixed income investments going forward.
Factor affecting markets:
- The economy has seen 4 quarters of weakness, with GDP growth coming down to below 6%. Experts believe the coming festive season, supported by some government initiatives, should lead to an economic recovery.
- FPI (Foreign Portfolio investors) have been selling Indian equities, affecting both Indian equities and contributing to the Rupee weakness. FPI have been steady investors in the Indian markets and a reversal in this trend is an important indicator to watch out for.
- The ongoing NBFC crisis is affecting credit availability to businesses and consumers in India. Many weak NBFCs are struggling to raise capital and the stronger NBFCs and Banks are stepping in.
- The global trade war, especially between the US and China, is showing no signs of abating. This can have several implications across the world. Though India is relatively less affected by this trend, some effect is inevitable if this trend continues.
Investors are seeing red in their portfolio thanks to four quarters of weakness, a dropping GDP and selling by FPIs which are in turn weighing heavy on financial markets. Weakening demand in the economy and poor credit availability means experts are hoping for a recovery during the festive season.