As part of Max Life’s endeavor to enhance its investments team, I have joined Max Life in September. I look forward to continue to provide optimal returns to our customers. It is a pleasure to introduce the thirteenth issue of the Investment Newsletter and I look forward to many continuing interactions with you, going forward.
The economic outlook in US looks promising even as the US Fed continued its QE taper and its guidance on future interest rates was confusing. This shows that the Fed remains unsure on global economic recovery if not the US recovery. Other developed economies – Europe and Japan remain under pressure. The European Central Bank (ECB) too has announced its version of QE, however its effect is yet to be seen. Volatility in risk assets was high this quarter with commodities falling between 10-15% in the last 3 months and equity markets falling close to 5-10%. In this situation, US bond yields fell as there was a risk-off trade even as taper was on!
Domestic investor sentiment which was at the peak post 2014 general elections was negatively impacted by a conservative budget and no big announcements. However the recent electoral results in Maharashtra and Haryana have again propped up investor confidence. Big reforms under either “Make in India”, “banking reforms” or “urbanization” are being anticipated. India has been able to attract foreign flows from developed markets like Japan and US since May 2014, and this will help to keep Indian markets to move forward. RBI has maintained a steady resolve of arresting inflation below 6% over the coming years. The currency (rupee) has been largely stable over the past few weeks.
Over the next few months, we see an 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 Government makes necessary reforms to boost overall economic growth. We believe interest rates are going to head lower in the medium-term, even as RBI might like to wait a bit longer. Our fund-managers have tactically adjusted asset allocations and duration to put our view and outlook into practice.
CIO, Max Life Insurance.