Increased risk appetite and higher inflows
The Indian market developed positively in March. After a weak February for equities there was a bounce-back from greater global risk appetite, resulting in large flows of capital to emerging markets including India. Foreign investors net bought Indian stocks for USD 4 billion.
Carnegie Indienfond rose 3.4 percent in SEK. The US Fed held off further interest rate hikes, and announced that it wants to wait before raising interest rates further due to turmoil in world stock markets and uncertainty about developments in China. The dollar softened on this announcement, causing commodity prices, particularly oil, to make a sharp rebound from oversold levels.
India’s new budget was well received, and the government stuck to its plan to cut the deficit. Some minor reforms were approved in the real estate and commodity sectors. For example, Indian steel producers won protection from cheap Chinese steel through the introduction of an import duty. This also helped the banks, which have large outstanding loans to steel companies.
Lower food prices resulted in lower inflationary pressure in early 2016. Combined with the lessened risk of US rate hikes, this means we now expect an interest rate cut of 0.25 percent in early April. The best performers this month were interest rate sensitive companies and cyclical industries. The pharmaceutical sector was hit by bad news when the US Food and Drug Administration chose to inspect the products of a number of Indian companies. In several cases these resulted in warnings and demands for action.
We made a new investment in Aurobindo Pharma in March. Carnegie Indienfond upped its investments in Infosys and Godrej Consumer Products.
Year-end reports will be presented in April, and are expected to be slightly better than last year. Profits are predicted to rise by 10-15 percent next year. If the situation in China is stabilised and the Fed does not raise interest rates, the central bank may cut interest rates further.