The broader market continued its outperformance vs. Sensex, again this month. The S&P BSE Midcap Index appreciated by 2.54% and the S&P BSE Smallcap Index rose by 6.30%. With this month’s performance, the Midcap & the Smallcap index have given a return of 29.4% & 48.6%. on a YTD basis.
Quantum Long Term Equity Value Fund saw a 1.61% appreciation in its NAV in July 2021. This compares to a 0.98% appreciation in its benchmark S&P BSE 200. Cash in the scheme stood at approximately 8.3% at the end of July. Our portfolio bets continue to be skewed towards cyclicals like large financials, select commodities, mobility focussed consumer discretionary, and utilities as they benefit the most from the economic rebound tailwind. We are sticking to names that are market leaders in their respective domains, have capable management & strong balance sheets. Technology stocks owned by us are seeing earning upgrades despite elevated expectations demonstrating their ability to benefit from a strong demand tailwind for their services.
Economic activity has continued to improve in June & July (the unlocking began in the first week of June 2021). However, most indicators are soft as compared to March 2021 (before the 2nd wave lockdown). In the near term, recovery should continue as companies rebuilt channel inventories for the festive season. However, while the macroeconomic indicators are improving, credit demand in the economy, especially for a business loan is still lacklustre. The business loans have grown at anaemic levels of 1% y-o-y in July. The pickup in demand for term loans by corporates for fresh investments in capacity creation will be the key to the sustainable economic rebound. It has remained elusive for the past five years as Indian corporates have focussed on deleveraging their balance sheets rather than investing in newer capacities.
Data Source:
CMIE, RBI, ewaybill.nic.in Data as on July 2021
Monsoons have recovered after a brief lull:
The southwest monsoon had started well in the month of June-21. However, there was a lull in the progress of the monsoon in the first two weeks of July. It has picked up again & sowing acreage has started improving. The second wave of covid-19 had hit rural India hard, therefore a good monsoon & Kharif harvest is important for rejuvenation of the rural & semi-urban economy.
FPIs have been sellers but domestic MFs have been buyers:
FPIs have turned sellers of Indian Equities in July-21….
Read More: ‘Strong rally continues in equity markets; mutual fund investors should