Avoiding risk has spread

Weekly update — 13 July 2020
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Markets last week

The NIFTY inched up 1.5% last week, marking consistent gains over the previous few weeks. Over the last few months, we’ve seen mutual fund flows nosedive across both fixed income and equity. June was a big blow to equity — mutual funds contributed ~INR 10,000 crores lesser compared to last year. The markets were holding up with massive equity inflows from foreign institutions during both May and June — June alone saw over ~INR 22,000 crores more compared to last year. Initial data in July points to the same trend across mutual funds. However, we are watching out if foreign investor action provides the necessary support.

Layoffs and salary cuts continue

Unemployment is close to its levels before the crisis, driven by the informal sector — no gains for the salaried

Managing costs is a crucial challenge across 60% of CEOs, according to a recent survey

No reversal in demand

A few isolated reports point to a small pickup in consumer durables owing to work from home requirements — they are still down 19% June compared to last year

More downgrades in the pipeline

35% of credit ratings on Indian companies either have a negative outlook or are on credit watch with negative implications, according to S&P Global

The government gets a boost

GST collections in June were down only 9%, compared to last year

COVID concerns remain

There are delays in the rollout of the Fed’s lending programme

Australia went into lockdown again the previous week

Allocation changes

There are no changes from last week.

Among other things, there are reports of insurance agencies witnessing a more-than-expected number of health claims related to COVID. This trend could materially increase prices across insurers. Please choose a floater policy, if you don’t have one yet.