By Atul Kumar - Fund Manager Quantum Long Term Equity Fund
During the month of June 2011, BSE Sensex gained 2.22% as compared to its level in the previous month. The narrow index i.e. BSE 30 did better than the other broader indices such as BSE 200 and BSE 500. Continuing their last month’s performance, FMCG and capital goods were among the best performing sectors. Real estate performed poorly and was the major loser followed by Oil & Gas and Metals during the month.
FIIs were net sellers to the tune of approximately USD 1.48 Billion in June 2011. Calculating from the start of the calendar year to date, FII net flows have been negative and stand at USD 382 Million. On the policy side in India, clearances were approved for some mining blocks, spreading a wave of relief among corporate and individual investors, given the delay in past few months. Recently, the oil regulatory body also got dragged into controversy for favoring a few players at the cost of national exchequer. The list of nexus between corporate houses and others parties gets bigger.
RBI released its monetary policy in the month of June 2011. As expected, the policy rate was increased by 25 basis points. In May 2011, inflation stood at 9.1% and given that it continues to be above the comfort zone of the RBI, future rate hikes are likely to occur.
The Government of India finally raised the prices of diesel and cooking fuels during the month. There was a decent price hike in diesel, LPG and kerosene
which was required, in order to bring down the losses of oil PSUs in India. The Government also cut excise/custom duties for these fuels, which will add to the fiscal deficit which is likely to shoot beyond the targeted 4.6%.
India is expected to perform better than many other economies in the future, bringing forward a number of opportunities for Indian companies. While inflation, slow government policies and weak global environment are among the key risks, we remain buyers of Indian equity for the long term.
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