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rom the CEO’s Desk Dear Investors, “The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn’t changed.”- Peter Lynch. In the past three decades, the capital markets have faced many adversities and, from all events, the markets have emerged stronger than ever, and it will do so this time too. The silver lining of the Covid-19 crisis is the dramatic fall in equity valuations, which enables investor to buy quality stocks at rates that, have traditionally contributed to long-term sustained rebounds. For equities, April was a bounce-back month; global markets recovered sharply from the lows of March, as the central banks and governments around the world have come out with a slew of monetary and fiscal measures to curb economic downturns. FY21 started on a volatile note for the equities and other risky asset classes, with India and many world economies remaining in a prolonged period of lockdown. This has changed the fundamental dynamics of demand / supply and is projected to adversely impact the economy and company earnings. Interesting trends emerged in domestic equity markets following a steep downturn in March; stocks recovered sharply and reported a return of ~15 per cent for Nity50, with global equity market returns also on similar lines, volatility index(VIX) which reached 80+ levels in March , subsequently dropped below 40, while FPI outflows declined from $8.4 billion (March) to $503 million (April). Positive news flows around the development of COVID-19 vaccines together with Covid-19 graph flattening globally, attractive valuation across multiple sectors provided a motivating backdrop for Indian markets to recover the March 20 losses. We expect the impact of earnings slowdown and economic downturn to be largely priced in, while the impact of strong policy stimulus is gradually emerging. As the Covid-19 scenario plateaus, the expectations of the FII / FPI to return to emerging markets, and India in particular, are not unfounded on the back of humongous global liquidity and low interest rate scenarios; while steady SIP flows will continue to support the market in the short term.

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