APRIL, 2021

Launch of Wealth Management Services &

Inauguration of SBI Wealth Hub, Mysuru
by Shri Dinesh Khara, Chairman, SBI, on 4th March, 2021.
 On-boarding of Wealth Clients
by Shri Dinesh Khara, Chairman, SBI.
Market View
At Crossroad: Waiting for a direction post run up.

The past one year has been a roller-coaster ride for investors both in the equity & debt market. The
uncertainty of the future with the outbreak of COVID-19 led to significant impact on both demand and
supply of goods and services. A record-breaking stimulus by the Global Central Banks to help navigate
global economy out of the woods has propelled the global markets in strong recovery mode from March
2020 lows. The Sensex was up 70.00% in FY 2020-21 leading to significant accumulation of wealth. On
the economic front, after two quarters of contraction, India’s economic growth is back in positive territory
with Gross Value Added (GVA) rising by around 1% YoY in Q3FY2021. On a quarter-on-quarter basis,
both Construction and Services sector drove the recovery, due to increased public spending. Going
forward, we expect GDP FY 2022 to grow by 11% YoY. Game-changer schemes such as Production
Linked Incentive (PLl) Scheme, large spend by the government and enhanced vaccination are likely to
aid this strong recovery in both GDP and corporate earnings (>30% earnings growth for Sensex in
FY2022). The government has decided to borrow around INR 12 lakh crores in FY 2021-22 to give boost
to capital expenditure.
However, rise in commodity prices especially crude oil has led to inflation rate averaging at the higher
end of RBI comfort band ranging 2% to 6%. The yield on the Government 10Y Bond has been hovering
between 6.10% to 6.25%, above the RBI expectation of ~6%. It is a tough situation for the RBI playing
the role as the debt manager to the government and adhering to its inflation targeting regime. Despite
the steepness in yield curve and expectation of reversal on monetary policy, we believe the RBI will
continue to be growth oriented rather than being inflation focussed. The increase in Open Market
Operations (OMOs) or bond purchases by RBI will ensure a gradual rise in interest rates.
Despite a growth-oriented Budget, Sensex has given a CYTD 2021 returns of just 2.6% on account of
fear of lower-than-expected earnings growth due to higher commodity prices and a sharp uptick in
valuations. Sensex is currently trading at 23x one year forward consensus earnings with a ROE of 14.6%.
However, as mid and small cap stocks continue to be relatively cheaper, both BSE mid cap index and
BSE small cap index are up 11% & 12% CYTD 2021, respectively. Q3FY2021 results indicate improving
demand as aggregate sales of BSE 500 companies were up ~6% YoY after five consecutive quarters of
decline. The second wave of infection beginning Feb’21, impacting bigger states will slow down the
recovery in beleaguered sectors such as hotels, real estate, transportation, etc.
At present, Equity market has gone up substantially and Interest Rates are likely to remain stable with
an upward bias. Debt funds placed in the short to mid segment of yield curve are attractive as this
segment is reasonably priced with modest duration. Target Maturity Funds are attractive currently as
they offer a certain degree of returns visibility, if held to maturity.
Regarding equities, for savvy investors increasing exposure to Multi Cap, Mid Cap, Focussed and Small
Cap Funds via STP/SIP route can be rewarding. Conservative investors looking at higher returns can
use Balance Advantage Funds (BAF) for their equity exposure. As history has shown that timing the
market is not possible so investors should not wait for a correction but use the current environment to
rebalance their portfolios.

Central Research Team

State Bank of India
Wealth Management Business Unit,
Corporate Centre, Mumbai.

1
Investment Outlook April 2021

Market Indicators & Outlook: Equities

March' 2021 - Equity Indices Returns

-0.5%

-1.3% -1.4% -1.4%

-1.5%
-1.7%
-1.8%
Sensex Nifty 50 Nifty Mid Cap BSE 500 S&P BSE S&P BSE S&P BSE
100 Largecap Midcap Smallcap

Last 1 Year - Equity Indices Returns

119.7%

99.1%
92.4%
79.1%
69.8% 72.2% 73.9%

Sensex Nifty 50 Nifty Mid Cap BSE 500 S&P BSE S&P BSE S&P BSE
100 Largecap Midcap Smallcap

Source: Bloomberg

• The ongoing rally in Indian Markets came to a halt in March with BSE Sensex and Nifty 50
declining 1.3% & 1.4% respectively. During March, BSE Mid & Small indices too witnessed a fall
of 1.7% & 0.5% respectively. The market was affected by rising retail inflation (CPI) data,
strengthening US Dollar & spike in Global Bond Yields. Rising domestic COVID-19 cases and
concerns over new restrictions too dented the sentiments. Weak global cues led by concerns
over COVID-19 induced lockdowns in Europe kept markets under pressure. Participants used
the higher levels & sharp rally seen in February to book profits.

• The last 1-year return of Indian Equity Markets has been the best in last decade, after overcoming
massive odds induced by business disruptions owing to COVID-19 lockdown and its impact on
the economy. In FY 2020-21 Nifty has gained over 72.00%, while Sensex has rallied over 70%.
It was also a broad-based rally wherein BSE Mid & Small Cap too rallied 92% & 120% respectively
in FY 2020-21.

2
Investment Outlook April 2021

Nifty MTD Attribution Sensex Index Forward P/E

1.0 0.8

0.5 0.3 0.4 34

0.0
0.0 0.0 29 +1 STDev
-0.1 -0.2
-0.2
-0.5
-0.6
-1.0 24

-1.5 23.19
-1.4
-1.6 19
-1 STDev
-2.0

14

Source: Bloomberg

Sectoral Trends: Nifty 50 slipped 1.4 % in March as weak global cues combined with the news
of a new mutant of the COVID-19 in India spooked participants. During the month, FIIs bought
equities worth INR 18,729 crores though MFs were marginal sellers of equities worth INR 9 crores
till 25th March 21. Selling pressures in Financials and Energy counters contributed to the market
fall. This was partially compensated by buying in the IT & FMCG stocks.

IT Services remain in sweet spot on the back of (a) Pandemic-led accelerated adoption of
technology (b) Digital IT services expected to clock 15-20% CAGR over FY20-25E (c) Potential
acquisition opportunities of captive units/ vendor consolidation to increase market share (d)
Dovish tone of new US administration on immigration. According to analysts, strong demand for
steel and, rising prices since the easing of lockdown have continued to drive the profitability of
Indian steel manufacturers. Further, fresh capex cycle may start with continued strength in
demand and prices of the commodity.

As per Bloomberg consensus estimate Sensex is trading at 23x one year forward P/E
compared to its Long-term average of 19x. From an investment perspective, we suggest
staggered investments (STP/SIP) to mitigate portfolio volatility and sharp drawdowns.
Aggressive investors can look at investing in Mid and Small Cap funds which together
present medium to long term opportunity within the equity market and conservative
Investors could look at Diversified Equity Funds with core exposure to Large Caps in line
with their risk profile and product suitability. For lumpsum investments, one could look at
Balanced Advantage Funds in line with their risk profile and product suitability as they
reduce the overall cyclicality of the portfolio.

3
 Investment Outlook April 2021

Market Indicators & Outlook: Fixed Income

Debt Market Indicators

6.63%
6.49%

6.37%
6.23%
6.13%
6.03%
5.97%

5.91%
5.49%
5.34%
4.94%

4.95%
4.71%

4.72%

4.47%
4.19%
4.04%
3.84%

1Y G-Sec 2Y G-Sec 3Y G-Sec 5Y G-Sec 10Y G-Sec Credit Growth YoY

25-Mar-21 26-Feb-21 31-Jan-21

India Yield Curve 25-Mar-21 26-Feb-21 25-Mar-20

6.30%
6.35%
6.13%
5.85%
6.23%
5.35%
4.85%
4.35%
3.85%
3.35%
2.85%
3M 6M 1YR 2YR 3YR 5YR 10YR

• After rising for 2 consecutive months due to higher government borrowings announcement & rise in
global yields, Gilt yields fell in March on back of (a) Decline in US treasury yields (b) Fall in crude oil
prices (c) RBI cancelling the last scheduled weekly debt sale of the fiscal (d) Expectations that RBI
would support the bond market by increasing the quantum of bond purchases towards the end of the
fiscal (e) Sporadic value buying by institutional investors.
• During the month, the short end of the yield curve fell on the back of comfortable liquidity & value
buying. Fear of liquidity withdrawal, inflation & fiscal stress kept Mid-to-Long end of the curve firm. The
curve is now pricing in more negatives – liquidity tightening, rate hikes etc. The current curve is too
steep, enhancing the case to chase the carry in fixed income as opposed to capital gains.
• We believe that the short to medium segment of the curve is attractive as the yields in short to
mid part of the curve are reasonably priced with modest duration. Even with the tendency of
the yields to inch up, the higher accrual should provide a buffer to mitigate some of the erosion
in price due to firming yields.
• Short Duration funds, Corporate Bond funds, Banking & PSU Debt funds, Target Maturity Debt
Index Funds, Money Market funds, Low Duration funds and Ultra Short Duration funds with
major exposure towards AAA bonds can be considered with an investment horizon
commensurate with the maturity and duration of the schemes.
•

4
Investment Outlook April 2021

India Liquidity, CPI and 10 Year G-Sec Movement

8.00 8000

7.50 7000

7.00 5,012
6000
6.50
5000
6.00
6.2 4000
5.50
3000
5.00 5.0
2000
4.50

4.00 1000
10 Year G-Sec (%) CPI % Liquidity (RBI LAF)(INR Bn)(RHS)
3.50 0

Source: Bloomberg

• Liquidity continues to be accommodative

and in surplus mode at INR 5000 crores
which in turn put pressure on short term
yields. This sustained period of liquidity
surplus has been due to increased US
dollar purchases by the RBI along with
the various liquidity infusion measures
being undertaken like OMO, LTRO, and
TLTRO. Liquidity continues to be in
surplus mode. The CPI index rose to
5.03% in Feb vs 4.06% in Jan due to rise
in fuel and food prices.

• Term spreads contracted during the

month due to fall in Gilt yields as RBI
cancelled its weekly auction, decline in
US bond yields, & fall in crude oil prices.
Similarly, corporate bonds prices rose
due to value buying by DIIs at higher
levels. The current high yields prevailing
in the mid to long end of the corporate
curve is attracting MF buying for their
NFOs.

5
Investment Outlook April 2021

Indian Economy & Key Macro Indicators

IHS Markit India Manufaturing and
65 Services PMI
8
Inflation Trajectory
57.5

55
6 5.0
55.3
45
4 WPI %
4.1
35
2
25

Manufacturing PMI 0
15
Services PMI
5 -2

-4
India's services PMI touched 55.3 in February, The retail inflation rose to 5.03% in February
owing to a quicker increase in new orders with 2021, due to rise in fuel and food prices but is
roll-out of COVID-19 vaccines that led to an within RBI's comfort zone 4% with +/-2%
improvement in business confidence. The Mfg. tolerance band. WPI shot up to a 27M high of
PMI eased a little in Feb but remained robust as 4.17% in February 2021 largely because of
firms lifted input inventories at record pace with broad-based rise in fuel and food prices and a
strong growth in sales and production. spike in the price of manufactured items.
decline)
India Mercantile Trade Forex Reserves (USD Bn)
1000 50 600 582.3
40.5
40 550
-4000
30
27.9 500
-9000
20
450
-14000
10
400
-19000 0
350

India Trade Balance ( in USD mn) (LHS)

India Exports in USD Bn
India Imports in USD Bn

India's exports grew 0.67% to $27.93 billion in India’s Forex reserve rose by $233 million to
February while imports rose 6.96% to $40.54 $582.3 billion for the week ended March 19 as
billion. The exports continue to see signs of per RBI. The increase in the overall was largely
further revival with rising order bookings led by on account of a swelling of the Foreign
improving global growth and benign change in Currency Assets (FCA), which rose $157
global supply chain. A second wave of COVID- million to $541.18 billion. The FCA includes
19 remains a threat to exports activity. appreciation or depreciation of Euro, Pound
and Yen.
Source: Bloomberg

6
Investment Outlook April 2021

Source: Bloomberg, SBI ERD

7
Investment Outlook April 2021

Global Economy & Market Indicators

China Import Vs Export YoY% US Nonfarm payroll &
154.9 Unemployment Rate
155 Import Export
4300 20
916
105 1800
-700 15

Jun-20
Jun-18

Mar-19
Jun-19
Mar-18

Mar-20

Mar-21
Dec-18

Dec-19

Dec-20
Sep-18

Sep-19

Sep-20
-3200
-5700
55 -8200 6.2 10
-10700
-13200 5
5 -15700
17.3 -18200
-20700 0
-45
Nonfarm Payroll (LHS)
Unempoyment Rate (RHS)

China’s exports were stronger than expected in US non-farm payroll figures significantly
January and February, indicating China trade outperformed expectations for February, as
economy remained robust early in 2021 despite 379,000 jobs were added. Unemployment is
the continued impact of the COVID-19 now at 6.2%, down from 6.3% in January,
pandemic worldwide. Exports grew by 60.6% in and well below April’s high of 14.7%. Most of
combined figures of (Jan-Feb 21) compared to the jobs (355,000) came from the leisure and
a year earlier vs 22.2% growth in imports from a hospitality sector, as dining restrictions were
year earlier. eased in parts of the country.

Markit Eurozone Manufacturing PMI Japan GDP Real QoQ%

6 5.3
65 62.4
4 2.8
60
2
55 0.5 0.6
0.1 0.2
50 0

-0.7 -0.6
45 -2
-1.8
40 -4
35
-6
30
-8
-8.3
-10
The flash reading of the Eurozone PMI showed Japan's economy expanded at 2.8% in
business activity returned to growth in March as Q42020, slower-than-initially-reported in
it touched 62 levels, driven by a record gain in October-December due to firms tightening
manufacturing. The services sector continued spending on plant & equipment, capital
to be constrained by the pandemic. The bright expenditure expanding less than previously
spots were spill over effects from strong thought and sharp cuts in inventories as the
manufacturing growth & some easing of virus COVID-19 pandemic hit the demand.
containment measures. Source: Bloomberg

8
Investment Outlook April 2021

March' 2021 - Global Equity Indices

US Dollar Index and US 10 Yr
5.5% Returns 105 3.5
100 3
93.32.5
95 2
90 1.5
85 1.7 1
-0.8% 0.5
-1.6% 80 0

Jun-20
Jun-19

Apr-20
Aug-19

Dec-19

Aug-20

Dec-20
Feb-20

Feb-21
Oct-19

Oct-20
-4.1%
Dow Jones NASDAQ Nikkei 225 Shanghai SE
Comp DXY Curncy USGG10YR Index

Global Equities ended mostly mixed, as Fed’s The yield on the benchmark US 10Y Treasury
decision to maintain an accommodative Bonds shot upto 1.71% in March, a level not
monetary stance raised hopes for global seen since January 2020 on higher inflation
recovery but resurgence in COVID-19 cases expectations as the economic recovery in the
across the world affected the sentiments. U.S. country gathers steam. The spike comes after
shares reached a record on optimism about a the US Federal Reserve lifted the inflation and
stimulus-fueled economic recovery. The Nasdaq growth forecasts but reiterated its commitment
index fell due to profit booking in technology to keep the benchmark interest rates low until at
shares. Chinese indices fell led by losses in least 2024. The dollar index strengthened
material and property shares. Nikkei declined on during the month as investors bet fiscal stimulus
renewed worries of the pandemic-induced and aggressive vaccinations will help United
lockdowns in Europe. States lead a global pandemic recovery.

Commodity & Currency 25-Mar-21 Pr. Month 1 Yr Ago

Gold ($/ounce) 1727 1734 1617
MCX Gold Spot 44653 46425 40989
Brent Crude Oil ($/bbl) 62.0 66.1 27.4
USD - INR 72.6 73.5 76.1

• Gold prices weakened in March on US economic optimism, vaccine progress, higher yields and lack
of ETF buying. Further fall in prices was prevented by fall in US dollar index from recent highs, mixed
US economic data, rising virus cases and dovish central bank stance. Indian gold (MCX) prices too
fell to INR 44650 levels from INR 46420 tracking lower global prices. Gold remains attractive as a
hedge against heightened volatility.

• Crude oil fell to $62.00/ barrel during the month as data showed that US crude inventories
unexpectedly rose last week as a deep freeze in the southern states curbed demand from refineries
that were forced to shut, also new wave of COVID-19 dampened hopes that fuel demand would
recover soon, and the strengthening US Dollar kept the prices under control.
• The rupee remained well anchored during the month amid a renewed influx of FPI flows and the
recent fall in crude oil prices. The US Fed’s commitment to keep interest rates near zero for a
prolonged period, is also supporting an appreciating bias for the domestic currency.
Source: Bloomberg

9
Investment Outlook April 2021

MF: Top Performers

Source: Crisil

10
Investment Outlook April 2021

MF: Performance of SIP

In Equity Funds

Source: Crisil

11
Investment Outlook April 2021

MF: Performance of our

Focused Equity Funds

Source: Crisil

12
Investment Outlook April 2021

MF: Performance of our

Focused Equity & Hybrid Funds

Source: Crisil

Notes

13
Investment Outlook April 2021

MF: Performance of our

Focused Debt Funds

Source: Crisil

Notes

14
Investment Outlook April 2021

India Mutual Fund Trend

Aum Lakh Cr Nifty
AuM vs Nifty Trend
34 16,000

14,000

32

12,000

30

10,000

28 8,000

6,000

26

4,000

24

2,000

22 0

Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21

Source: SEBI, AMFI,Bloomberg

15
Investment Outlook April 2021

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Sources: SBI Wealth Management Research, SBI Economics Research Department (ERD), SBICAP Securities, CRISIL Research,
RBI, Bloomberg, CMIE, Reuters, International Monetary Fund, Election Commission of India, Energy Intelligence Group

All data used in this report is as on 25th March, 2021 unless otherwise specified.

For Queries, Please Contact Your SBI Wealth Relationship Manager

Or Write to us at [email protected]

16
 Launch of Wealth Management Services &
Inauguration of SBI Wealth Hub, Amritsar
by Shri Soma Sankara Prasad, DMD & GCO, SBI,
on 12th March, 2021.
Hyderabad Shri. Srinivas Devarakonda 7675911616 [email protected]

Metro
Metro Shri. Ashish Kumar Sahu 7720914914 [email protected]
Metro Shri. Kalpita Kamothi 9769173120 [email protected]