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Monthly commentary

February 2021

Opinions and commentary provided by Aditya Birla Sun Life Asset Management.

(Note: In India, the Financial Year runs April 1 to March 31, so the current period is FY 2020-21)

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Equity Market Recap

Indian equity markets had that were analogous to most other global markets in February on the back of gradual improving economic outlook. Better than expected quarterly earning numbers, positive economic data and optimism regarding the roll out of the COVID-19 vaccine program also boosted market sentiments.  

Investors received the Government’s FY22 Union Budget positively, celebrating a low tax budget when the market expectation was that there would be a bevy of COVID taxes. The policy stance of the Monetary Policy Committee, better than expected macroeconomic numbers and strong corporate earning numbers also generated positive sentiment. 

Renewed concerns over the COVID-19 pandemic amid reports of increased infections and impositions of restrictions in parts of the country restricted the sentiment upside.

The Sensex breached the 52,000 mark and the Nifty 50 surpassed 15,300 mark for the first time during the month only to retreat later. 

Newsflow and Market Performance

Indian markets were weighed down in relation to global cues, but outperformed relative to global markers after the release of the Union budget. Domestically, the focus was on the December quarterly earnings. Adjusted net profit after taxes for the BSE All Cap index (around 840 stocks) grew at 33% year over year in 3QFY21.

Foreign Institutional Investors (FII) recorded net inflows of US $4.1 billion into Indian equities in February, the fifth consecutive month of inflows.

As long as a gradual increase in yields is driven by growth and moderate inflation, this is is a positive sign for Equities. Hence, the rise in yields does not alter our medium or long term outlook on the market and we continue to have a positive bias on Equities.

Overall, given that we are in the early stages of an economic recovery, monetary and fiscal policy remains supportive and thus the earnings rebound has been sharp. Relative valuations are still favourable, and FII flows continue to be strong and we are maintaining our overweight to equities.

Quarterly indicators

  Q3FY21 Q2FY21 Q1FY21 Q4FY20
GDP (%) 0.40 -7.50 -23.90 3.10
CAD as % of GDP   2.40 3.80 0.10

Source: Refinitiv

FY2021 = Fiscal Year ending March 31st ,2021
Q3FY21: Quarterly ending December 31st, 2020
Q2FY21: Quarterly ending September 30th, 2020
Q1FY21: Quarterly ending June 30th, 2020
Q4FY20: Quarterly ending March 31st, 2020

Return Monitor

Indices, commodities & currencies   Returns (in %)
  Value as on 
February 28 2021
1 Month 6 months 1 year
MSCI India NR 696.27 4.29 21.63 21.76
MSCI India Small NR 552.07 10.84 36.06 30.57
Brent Crude (CAD/bbl) 85.11 20.24 41.76
INR (per CAD) 58.01 1.73 3.32 7.17
INR (per USD) 73.47 0.71 -0.21 1.72

Source: Morgan Stanley, Refinitiv. Values and Returns as on February 28, 2021

Valuation Ratios

Ratios MSCI India NR MSCI India Small NR
P/E 37.35 56.03
1 Year forward PE 23.88
P/B 3.34
Dividend Yield 8.94% 5.72%

Source: Morgan Stanley. Values and Returns as on February 28, 2021

Important Information

Views expressed are those of Aditya Birla Sun Life AMC Ltd., sub-advisor to select Sun Life Excel emerging markets mutual funds for which Sun Life Global Investment (Canada) Inc. acts as portfolio manager. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any mutual funds managed by Sun Life Global Investments (Canada) Inc. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.

This commentary is provided for information purposes only and is not intended to provide specific individual financial, investment, tax or legal advice. Information contained in this commentary has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy. This commentary may contain forward-looking statements about the economy and markets, their future performance, strategies or prospects or events and are subject to uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. Forward-looking statements are not guarantees of future performance and are speculative in nature and cannot be relied upon.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Investors should read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. 

© Sun Life Global Investments (Canada) Inc., 2020. Sun Life Global Investments (Canada) Inc. is a member of the Sun Life group of companies. Aditya Birla Sun Life AMC Ltd. is a joint venture between the Aditya Birla Group and Sun Life Financial Inc.