Invest in Credit Risk Mutual Fund or not?

Benchmark equity indices were on a record-breaking spree this week with the Nifty touching an all-time new peak of 15,733 whereas the barometer index Sensex made a new closing high of 52,232. Likewise, the broader market indices BSE MidCap and BSE SmallCap were also trading near their lifetime highs of 22,540 and 24,280, respectively.

A closer look at the BSE500 index shows that as many as 41 constituents of its index delivered double-digit returns to investors this week. With a gain of 91.63% PNB Housing Finance was the top performer of the week as it shares rallied from Rs 437 on May 28, 2021, to Rs 838 on June 4, 2021, citing news of investment from Aditya Puri, Former HDFC Bank CEO and Carlyle Group in the company. Adani Enterprises (up 30.61%), Suzlon Energy (up 29.00%), Spandana Sphoorty Financial (up 28.73%), Gujarat Fluorochemicals (up 27.09%), Indostar Capital Finance (up 25.79%) were the other stocks that rallied over 25% this week.

Expert view

“Domestic markets witnessed an eventful week with regard to the release of Q4 GDP, PMI data, and RBI’S MPC announcement amidst increased optimism due to declining covid cases. A delay in the start of the monsoon season also added cautiousness to the market. India’s GDP shrank by 7.3% in FY21 whereas, Q4 reported better-than-expected growth of 1.6% – where agriculture, industry, and service sectors showed signs of revival. Factoring the impact of the second wave, RBI reduced the FY22 GDP forecast from 10.5% to 9.5% and trimmed the inflation forecast from 5.2% to 5.1%. As expected, RBI kept its policy rates unchanged and reiterated its accommodative stance. G-Sec buying and liquidity support to MSMEs and affected sectors will help to overcome the pandemic hit the economy,” said Vinod Nair, Head of Research at Geojit Financial Services.

Top gainers

Adani Total Gas (up 22.10%), Future Consumer (up 21.40%), Heritage Foods (up 21.36%), Future Retail (up 21.12%), Muthoot Finance (up 19.12%), Bank Of Maharashtra (up 18.61%), IRB Infrastructure Developers (up 17.92%), Mahindra CIE Automotive (up 17.34%), Minda Corporation (up 16.99%), Indiabulls Housing Finance (up 16.83%), LIC Housing Finance (up 16.35%), JSW Energy (up 16.07%), Gujarat Gas (up 15.48%), Indiabulls Real Estate (up 15.18%) and Adani Power (up 15.06%) were among other majors gainers of the week.

Outlook

Market participants will be looking forward to the Industrial Production and Manufacturing Production data for April will be released on 11 June 2021. Progress of monsoon will be closely watched. The Indian Meteorological Department has predicted a normal monsoon in most parts of the country in June. As per the weather department, the country is likely to experience 101% rainfall during the monsoon season. The IMD will issue the forecast for the July rainfall in the last week of June 2021.

Besides Covid caseload, the movement of the rupee against the dollar and crude oil prices, the trend in global stock markets will dictate the trend on the bourses in the near term. Investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) will be monitored.

The key thing to watch out for in the near future would be the US bond yields because any rise in yields can take out the FII money from developing countries like India to western markets and could also be a risk for emerging markets currencies.

Commenting on the market outlook, Siddhartha Khemka, Head – Retail Research at Motilal Oswal Financial Services said: “Sentiments continue to buoyant as fresh covid cases continue to decline while vaccination pace picks up and supplies getting increased. States have started with phased wise unlocking of the economy which will help revive commercial activities. Hopes of further stimulus by the government is also bolstering investor confidence. Thus, as the 2nd Covid-19 wave continues to recede in India and pace of vaccination picks up, we expect the long-term fundamentals to remain intact.”