Market Update- March 2021

The month of February was yet another strong one for Indian equity markets with the Nifty 50 gaining 6.6%. The broader markets did much better with the BSE Midcap index up 10.5% and BSE Small cap 250 index up 12%. Interest clearly shifted to economy related stocks and cyclicals even as valuations became the dominant driving factor for stocks. On the domestic front, positive sentiments were driven predominantly by expansionist announcements in the Union Budget and strong corporate results for Q3 FY21. Foreign flows continued to be strong with inflows of ~USD 3.5 bn.

Indian economy exited recession as real GDP growth came in marginally positive in 3QFY21, driven by manufacturing, construction, and financial/real estate sectors. The Prime Minister and Finance Minister reiterated privatisation of most government companies in multiple forums. That led to renewed interest in PSU (public sector undertakings) stocks and boosted general investment environment.

Globally, concerns arose towards end of the month led by a sharp increase in US 10-year yields to 1.6% briefly. However, US Federal Reserve chairman Jerome Powell reiterated the Fed will not hike interest rates prematurely and the central bank’s support to the economy will continue despite a brighter outlook.

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