Skip Ribbon Commands
Skip to main content
​ ​​​

AUGUST 2021.jpg

Dear Investors,

Post two months of consolidation, the Indian Equity Market (as measured by Nifty 50 Index) rallied by 8.1% during the month of August, to close at all time high levels. Nifty 50 outperformed most global indices by a wide margin. BSE Midcap and Small cap indices gained 3.3% and 0.5% during the month indicating preference for large cap during the month. Sectorally IT, Oil & Gas, Power outperformed while Auto, Metals & Realty underperformed during the month.

Fed Chair, Jerome Powell, in his speech at the Jackson Hole Symposium, highlighted that he and most of the participants were of the view that “if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year”. The Fed see tapering not associated with rate hikes. The Fed was also of the view that the test of “substantial further progress” has been achieved regarding inflation and the labour market is on track of a robust recovery with abundant labour demand and falling jobless claims.


In the Monetary policy in August, The Monetary Policy Committee (MPC) maintained status quo on rates and stance which is in line with market expectation. Repo rate unchanged at 4%. Stance remains “accommodative”. All six members voted for keeping repo rate unchanged. The “accommodative” stance to continue as long as necessary to sustain growth on a durable basis and to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.


July Consumer Price Index (CPI) inflation dipped to 5.6% versus 6.3% YoY in June. Food inflation for July stood at 4.5%, 90bps lower than in June. Even adjusting for falling base, food inflation eased. Importantly, some of the high-inflation components (edible oils, pulses, etc.) have started to contract sequentially. Meanwhile, food inflation remained benign in vegetables and cereals (deflating YoY), followed by milk and sugar (<2% YoY) with even prepared meals and fruits inflation cooling off.


Core inflation on reported basis remained elevated at around 5.9% (over a base of 5.7% in July 2020). Higher input prices are weighing on goods inflation (FMCG, textiles, etc.) which continue to move higher, while persistent fuel price hikes is keeping energy and energy-related services’ inflation in double digits, despite high base.

June Index of industrial Production (IIP) grew 13.6% YoY, but for Q1FY22 activity contracted 3.4% (on a 2Y CAGR basis, much better than contraction seen during the first lockdown. Restrictions were much less stringent in the second wave and business seems to have adjusted to new norms and exports have held ground much better than the first wave helped by buoyant global demand.

On year-to-date basis Nifty 50 index has rallied by 20%, in line with US markets, but ahead of many emerging and developed markets. Strong increase in vaccinations and broadly inline 1Q results have kept sentiments buoyant. Nifty 50 Index net profit grew by 102% YoY broadly in line with street estimates. Street projections are for over 30% growth in Nifty earnings for FY22 and 15-20% growth in FY23E. Key concerns are around third wave of covid however increasing vaccination coverage should help reduce the impact of 3rd wave. We remain cautiously optimistic on markets. 


Sanjay Chawla

Chief Investment Officer

Source:, RBI, Kotak Securities, Edelweiss Financial

Mutual Fund investments are subject market risks, read all scheme related documents carefully.