Hexagon Wealth



April 1, 2013
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Markets Last Week



SENSEX



FII
SECTOR
                                      INDICES


The Sensex finished FY 2013 on a positive note as it rose to a one-week high of 18,835.77 on 28th March - the last day of the fiscal year. During the week, the Sensex rose by 0.5%.

The majority of the sector indices rose during the week, led by the S&P BSE Consumer Durables Index which gained 3.9%. The biggest losers were the S&P BSE Auto Index and the S&P BSE Capital Goods which fell by 1.2% each.

In FY-13, FMCG sector was the best performer which has delivered an incredible return of 31.74%. At present, the PE of FMCG index is at around 36x, the highest among all other indices. Given the slowdown in the volume growth of the FMCG companies, one needs to be watchful as the valuations are way too expensive.

How did Mutual Funds fare in the FY13?


The Sensex ended the year with an 8% gain after considerable volatility. But most actively managed equity funds underperformed the Sensex. Hardly a handful outperformed the index and those that did were not the consistent performers, except for Birla Sun Life Frontline Equity Fund and Templeton India Equity Income Fund in the list. Hexagon’s active strategy was helpful to add returns since in one of our strategies we not only bought below 17000, but also sold some at 18700 and 19640 and still holding cash!

Can a Cyprus happen to India?


Cyprus was just waiting to happen – its banks were loaded to the gills with Greek debt. Since the banking sector in Cyprus is many times its national GDP, rescuing it is akin to rescuing the country! To bail out its banks would have cost 17 billion Euro, taking the national debt to GDP ratio from 86% to 140%. Unthinkable. Who took the hit? The wealthy (mostly Russian) depositors..

Taking a hit!

The economy in India is far more diversified and banking system better monitored for risks. Secondly, the government as a policy does not let banks fail, rather choosing to merge them with healthier banks so that depositors do not suffer. The last case of a bank failing and depositors loosing was in the 1960s after which the policy changed.

Pessimism on Gold will hold the key…


The Current Account Deficit ran to a record high of 6.7% of GDP for Q3. But the present pessimism on Gold in the international markets combined with lackluster gains last year, and the actions on the ground in India since the Budget may reduce gold imports in the future. Along with this, if oil prices reduce some, the CAD would fall. Definitely healthy for equity flows if political instability does not hold up FII flows.

Sources:
Global Indices: Wall Street Journal
Domestic Indices: BSE/ Accord Fintech

FII/MF data: SEBI/ Accord Fintech





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