Industry Synopsis
Total AUM as on June 30, 2011, was up 14% YoY primarily on account of an increase in assets under the money market funds as the rates at the shorter end are at more than 8%

Markets Last Month
  • Indian equity markets underperformed their global counterparts during the first half of 2011 with FII flows on the lower side amid various macro headwinds. For H1CY11, the Sensex was down 8% while the midcap and small cap index were down 12% and 16%, respectively
  • Among sectors, the FMCG index was the only one to close positive for the first half. Other sectors to outperform the Sensex included banking and health care
  • June WPI inflation accelerated to 9.44% (consensus 9.68%) from provisional 9.06% level in May. The upward revision trend continued with April inflation data revised up from 8.66% to 9.74%. In sequential terms, the wholesale price index rose 0.8% MoM. Inflation continues to remain above the RBIā?Ts comfort zone

Going Ahead
  • Going forward, the upcoming quarterly results season needs to be closely watched both from a growth perspective as well as to gauge how companies are dealing with margin pressure. In addition, the progress of the monsoon, which has so far been normal, needs be closely monitored
  • At current levels, the market is trading at the lower end of the historical valuation and is already discounting the short-term macro headwinds like higher commodity prices, higher inflation, tight monetary situation and uncertain global economic scenario. An improvement in any of these factors may improve the outlook for the Indian equity markets
  • The current weakness in the market provides investors an opportunity to accumulate quality mutual funds as we expect the market to be at higher levels by the end of 2011 as they are trading at a P/E of 15x current year FY12 earnings, the lower end of the historical (14-17x). After six months, the market will be discounting FY13 earnings, which will make it very attractive from a valuations perspective

Source: ICICIDirect