From Chairman's Desk
06 May, 2025
Dear Investors,
The market started the month on a nervous note when President Trump announced retaliatory tariffs in his "Liberation Day" speech. However, the market bounced back after the US Government announced a 90 day pause on retaliatory tariffs. The Nifty and Sensex rose by 3.5% – 3.7% closing the month of April above the psychologically important 24,000 and 80,000 levels respectively. FIIs turned net buyers after 3 months. Large caps outperformed mid and small caps in April. There are continuing concerns about the valuations of some midcap stocks even though valuation (PE ratios) of midcap stocks have come down considerably from their highs. Among industry sectors, consumer durables, telecom, oil & gas, FMCG, banks and automobiles were the best performing sectors in April. Metals, IT and capital goods underperformed.
The biggest risk factor is the impact of the trade policies of Trump Administration on the global economy. The terrorist attack in Kashmir and escalating tensions between India and Pakistan is another risk factor for the equity market. Fall in crude prices can be another cause of concern in the medium term. While lower crude prices benefit India in lowering inflation, it also suggests slowdown in demand which is not favourable for global equities.
The RBI cut repo rate by 25 bps in April. The bond market cheered the rate cuts with yields coming down across the yield curve. The 364 Day T-Bill yield declined by 33 bps, while the 10-year G-sec yield declined by 12 bps. The yield curve has been steepening over the past few months. The steepening yield curve in a falling interest rate scenario is known as bull steepening. Bull steepening is favourable for fixed income investors. In a bull steepening scenario yields of short duration bonds fall faster than long duration bonds. It is a favourable scenario of shorter duration debt funds. The current bull steepening scenario is also favorable for longer duration funds because yields are attractive. Investors with sufficiently long investment horizon can benefit from attractive yields and price appreciation due to declining yields.
Gold has been the best performing asset class in the last 1 year rising 35%. Gold even crossed the Rs 1 lakh per 10-gram mark in April. Silver was also a strong performer rising 20% in last 1 year. However, gold and silver prices fell towards the end of the month due to rebound in the US dollar.
The domestic market is in recovery phase following President Trump administration's announcement of a 90 day pause on his administration's proposed tariffs on imports from the United States' trading partner. The market is hopeful that a mutually satisfactory resolution will be achieved on tariffs in the next 90 days. The Nifty is back above the psychologically important 24,000 level and though there is a long way to the previous high, it seems that the market has bottomed out at least in the short term. The deep correction has led to valuations moderating across all market cap segments (see the graphic below). Current levels may provide attractive investment opportunities for long-term investors.
The impact of trade wars on Indian economic growth will be relatively less compared to export-oriented economy like China. This may put India in a favourable position in the EM basket for FIIs. Investors should also maintain a long-term view, as far as investments are concerned. You should ensure asset rebalancing to avoid excessive risks in your portfolio.
Assuring you of our best services.
Best Wishes,
Ajoy Agarwal,
(Managing Director)
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