Morningstar Investment Management analysts have come out with the latest edition of the Morningstar Markets Observer Q4 2019. This report is designed to provide a quarterly perspective on markets, both domestic and global. The report is divided into three broad segments, i.e., Markets Overview, Economic Indicators – Global and India – covering our views across asset classes.
Here’s a glimpse of the report with an overview of markets and economic indicators – global and India:
Markets Overview: Stocks rallied in Q4 2019, to cement a strong year of gains across major world equity markets. Developed Markets (DM) saw another year of outperformance over Emerging Markets (EM). The valuation gap as per cyclically adjusted p/e ratio between the US, Europe & EM has widened significantly since the Global Financial Crisis of 2008 and is now greater than that observed in the last few decades. India’s equity markets saw polarized performance for the second consecutive year in 2019, with the top 10 stocks (heavyweights) contributing majorly to the S&P BSE 100 and S&P BSE 500 index performance as compared to a more broad-based performance contribution in the previous years. Over the last year, the yield curve has seen a significant downward shift and steepening with surplus liquidity and policy rate cuts largely getting transmitted at the short end, whereas medium & long end continues to face fiscal related risks. DM yields rose during the quarter as the risk aversion sentiment tamed with greater clarity on the Brexit and easing trade war fears.
Economic Indicators – Global: Inflation continues to undershoot respective developed market central banks’ target rates. Major central banks are expected to maintain status-quo after easing policy rates in 2019 while continuing with bond purchases and maintaining an accommodative stance. IMF projects global growth at 2.9% in 2019, increasing to 3.3% in 2020 and 3.4% in 2021. US economy is projected to expand at 2.3% in 2019, moderating to 2% in 2020.
Economic Indicators – India: Urban consumption demand remains weak as wholesale PV sales continue to be in the contraction zone (-16.4% y-o-y in Dec’19), although improving marginally as compared to previous months. Domestic air traffic growth has moderated to 3.7% y-o-y in December against 21% average growth seen in the previous three years. A contraction in wholesale two-wheelers and tractor sales, labor-intensive export sectors such as garments, leather, and jute manufacturers suggest a weak growth in the rural demand. However, this may see some improvement with pick up in food inflation and rabi sowing. Q2 results suggest that corporates are considering capital investments, pointing to a mild revival in private capex. Monetary and fiscal stimulus measures announced in 2019 are expected to revive growth to an extent. However, further focus on improving ease of doing business, land and labour reforms, pick-up in government expenditures, and measures to increase the disposable income to boost consumption and private capex, are few immediate essentials needed to revive domestic growth.
Access the full report here.
