Fact Sheet April - 2013.cdr - Tata Mutual Fund

MARKET OUTLOOKEquity marketPositive global sentiment, correction in international commodity prices and its positive effects on India’s current account balance,expectations of a rate cut, a positive monsoon forecast and better than expected earnings season, resulted in broad indices moving up for themonth of April 2013. In terms of sectors, most sectors like Auto, Banking, Capital Goods, Consumer Durables, FMCG, Healthcare, Oil & Gas,Power & Realty helped the index performance with the exception of Software and Metals. Large caps, mid-caps & small caps all moved up intandem to the positive sentiment during the month. On a year on year basis, mid-caps continue to trail the performance of large cap indices.As on 30-04-2013 Returns for the month Returns over the last twelve(%MOM)months(% YOY)Bhupinder SethiHead - EquitiesC N X Nifty Index 5930 4.4% 13.0%S & P B S E 100 Index 5941 4.6% 12.8%S & P B S E 500 Index 7385 4.2% 10.3%S & P B S E Sensex 19504 3.5% 12.6%S & P B S E Mid-Cap Index 6344 3.3% 0.4%FII’s continued to invest in the Indian markets during the month, though the quantum has been on a declining trend for the last two months.Net Flows (USD MN) Apr-13 Mar-13FII 1000 1675Mutual Fund -263 -297Apr-12 to Feb-13Apr-11 to Feb-12IIP 0.9% 3.5%Apr-13PMI 51 52Mar-13IIP numbers for April 2012 to February 2013 reflected weakness in all components of the index with manufacturing output, electricityproduction weak and mining output growth in negative territory (due to regulatory issues). On a use basis while capital goods production wasdown, consumer goods growth too was down due to weak demand in both durables and non-durables. The manufacturing PurchasingManagers Index a leading indicator of the economy was slower in April 2013 than March 2013 due to a fall in order flows from domestic andexport markets. In line with the slowdown, firms have scaled back purchases of inputs and stocks of finished goods have risen. Powershortages constrained output, leading to larger order backlogs inspite of a slowdown in new orders. On the positive side, both input andoutput price inflation continued to moderate giving some leeway to RBI to cut rates.As we write this note in early-May 2013, RBI has come out with its annual monetary policy statement for the financial year 2013-14, in whichit has cut the repo rate (rate at which funds can be borrowed from the central bank) by 25 basis points to 7.25 per cent consequently reducingthe reverse repo rate (rate at which funds can be parked with the central bank) and the marginal standing facility to 6.25 percent and 8.25percent respectively. The reason for this move was to address the risk of slowing growth, managing inflation expectations and ensureadequate flow of credit to the productive sectors of the economy. RBI in its policy statement is cognizant that monetary policy action itselfcannot revive growth, as it needs to be supplemented by efforts to ease supply bottlenecks (especially in food and infrastructure), improvedgovernance, step-up in public investments, alongside with commitment to fiscal consolidation. For financial year 2013-14, RBI hasprojected an M3 money supply growth of 13 per cent, deposit growth of 14 percent and non-food credit growth of 15 percent. As a part of thepolicy statement, the central bank announced decisions to allow foreign institutional investors to hedge their currency risk by using exchangetraded currency futures in the domestic exchanges and also allow non banking authorized entities to be part of the payment systeminfrastructure.Corporate results for the quarter end March 2013 that were reported gave us a sense of bottoming out of corporate performance withrevenue growth in line with GDP growth, with flat to slightly improving operating profit margins. However, net profit growth was restrained bya pickup in overall interest costs, resulting in overall growth at the net level being muted. Sectorally banking, consumer and technologysectors reported double digit year on year revenue growth, and energy, and metals and mining reported flat to negative year on year revenuegrowth. The sectors which saw improvement in operating margins were Auto, Consumers and Energy.On the monsoon (summer rains) front, the India Meteorological Department (IMD) forecast normal precipitation of 98% of long periodaverage with a model error of 5%. This is a positive as ~80% of Indian farm land depends on the summer rains for irrigation and ~70% of theIndian population lives in rural areas where agriculture and related activities dominate. The IMD will give its next updated forecast in June2013 covering monthly forecasts for the whole season over four geographical regions of India.In terms of outlook for May 2013, the market will look forward to the rest of the corporate results for quarter ended March 2013 that will bereported and the progress of monsoons to the Indian coast. On the global front, investors will focus on happenings in US regarding the debtceiling negotiations and central bank moves in Europe and Japan to get direction.Disclaimer: The views expressed are in no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be anyinvestment, legal or taxation advice. Please consult your Financial/Investment Adviser before investing. The views expressed may not reflect in the scheme portfolios of Tata Mutual Fund.This note has been prepared using information believed to be accurate at the time of its use.3