It is a pleasure to introduce this twelfth issue of the Investment Newsletter. The US Fed continued its tapering Quantitative Easing (QE). The Fed also maintained guidance on interest rate hikes later in the year, despite witnessing negative growth in Q1 2014. The Euro region continues to face slow growth prompting European Central Bankto reduce deposit rates below zero. This was done to disincentivize savings and promote consumption and inflation. Geopolitical tensions in Iraq spiked up crude oil prices and would continue to impact net importing economies like India.
The hope of a potential shift in the political landscape after 2014 general elections is driving a sense of optimism in India. India has been able to attract foreign flows from developed markets like Japan and US and this will keep Indian markets steadily moving forward. RBI has maintained its resolve of arresting inflation below 8% over the coming year. RBI has steadily built up forex reserves, insulating our financial system from any immediate external shock. Another clear beneficiary was the currency (rupee) as it traded at a level close to its fair value after a prolonged period of depreciation. High growth leading to higher import bills could increase the risks of a worsening current account deficit.
Over the next few months, there is hope of improvement in the economic scenario as the Government executes its strategy of “Maximum Governance, Minimum Government”. We expect equity markets to generate positive returns over the medium-term as the newly elected government would make the necessary reforms to boost overall economic growth. We believe interest rates are going to head lower in the medium-term after a period of status quo in the near term. Our fund-managers have tried to tactically adjust asset allocations and duration to put our view and outlook into practice.
In this issue of quarterly newsletter, we have included articles on below topic:
CIO, Max Life Insurance.