• Call us toll free 1800 200 5577

CIO's views

CIO's views

Dear Policyholder,

After three years of respectable returns, 2015 was a difficult year for the markets. Many factors contributed to this disappointment – delay in implementing key reforms because of political deadlock, slower than expected earnings growth, RBI’s hawkish stance on inflation. In the second half of the year additional factors like the global commodity crash, Fed tightening, China slowdown, US Dollar strengthening and fears of Yuan devaluation further impacted investor sentiment. Overall though, for 2015, India ended as amongst the best performing Emerging markets, significantly outperforming its Asian and other EM peers. Given these facts and the backdrop, the performance does not look that bad. However, there are bright spots in the world - In US and Europe economic growth is holding up. If China does not decelerate rapidly and maintains its GDP growth near the reported 6.9%, it is highly unlikely that we could see sustained risk aversion.

Global equities rose during October-December, partly reversing their sharp August-September declines. Following devaluation of the Yuan in early August, the Chinese government adopted a more gradual policy wherein it diverted focus to a basket of currencies instead of the USD. IMF’s inclusion of Yuan in its global reserve currency basket helped in improving sentiments. The biggest event of the quarter was the decision by the US Federal Reserve to hike its benchmark rate by 25bps. This was the first rate increase in the US after almost a decade. Markets had anticipated this move for a long time and there was not much disruption due to this event. Emerging Market currencies, which had depreciated significantly before rate hike, fell only about 0-2% in the last quarter.

In India the Parliament failed to discuss either the much anticipated GST legislation or any substantiative economic legislation in the winter session of the parliament. Earlier in November, the NDA’s loss in the Bihar elections had also been seen in a negative light by the markets. India’s macro positioning continues to remain strong as it is poised for GDP growth rates higher than most other markets, lower inflation and possibility of rate cuts by the RBI. The Current Account Deficit has contracted to 1.1% of GDP. This implies that the Indian Rupee is amongst the best placed currencies heading into 2016 and beyond. Although there have been some setbacks to reforms due to political roadblocks; the Government has continued to do well on the executive action front with several reformist decisions like higher FDI limits being taken recently. The infrastructure spending push by the Government continues, even as the corporate sector lagged.

Market Outlook- In the near term, the upcoming budget (February end) will set the tone for domestic sectors as well as stock markets. The Government is evaluating steps to boost the agriculture sector largely through infrastructure related spends. Flows into equities from foreign investors may remain suppressed due to outflows by oil driven sovereigns and Global Emerging Market funds. Domestic flows, however, are sustaining despite market fluctuations and this is just the start of a long term trend towards preference for financial over physical assets. The long term outlook for the equity markets remains positive.

We are positive on Equities and Fixed income asset classes in India. Commodities and Real Estate, especially residential real estate will continue to underperform. In fixed income, we prefer to play duration rather than credit at this juncture. We are thus running a portfolio which has a higher duration than the benchmark.

In equities, our investment philosophy is to buy good quality stocks with visible growth triggers, at a reasonable price. We are positive on industrials especially non-leveraged construction companies, private-sector banks / finance companies and auto / auto-part manufacturers. We have identified sectors which are likely to be growth leaders e.g. road-building, railway, defense, multiplexes, mining equipment etc. and have focused on these segments of the market. We are underweight on metals, utilities, consumer staples and telecom sectors.


With warm regards
Mihir Vora
CIO, Max Life Insurance.

Did you Know?

Our aggregate Traditional portfolio witnessed a growth of 34.51%, and overall portfolio grew by 25% over the last one year till June 2014