Invest wise with Expert advice

India’s top performing mutual fund schemes in May 2024

1 Jun 2024 , 03:15 PM

POLITICAL UNCERTAINTY HITS MARKETS IN MAY 2024

May 2024 was a month in which the FPIs continued to be net sellers. FPIs sold Indian equities worth $3,666 Million in the secondary markets, but were net buyers in the IPO market to the tune of $603 million, ending the month as net sellers to the tune of $3,063 Million in equities overall. However, the FPIs were net buyers in debt and hybrids in May 2024 to the tune of $1,522 Million, ending up as overall net sellers to the tune of $1,541 million for May 2024. For calendar 2024 so far, FPIs were net sellers in equities to the tune of $2,770 million but the aggressive buying in debt ensured that at an overall level, the FPIs were still net buyers to the tune of $5,834 Million. However, the deluge of domestic money from Indian mutual funds and LIC (which manage over $1.1 trillion between them, has ensured that the markets did not have much to worry about.

The month of May 2024 was marked by elevated levels of political uncertainty and a mixed outcome of Q4 results. Let us talk about the results first. The sales revenue growth in Q4 was better than previous quarters, but that was largely on account of a boost in banking top line. However, profit performance was not too great due to cost pressures and banks facing thinning markets. Political uncertainty continued to be the name of the game, especially with VIX rising to above the 24 levels. However, there were two pieces of good tidings on the last day of May. The Q4 GDP growth came in at 7.8%, against the street expectations of 6.5%, resulting in full year FY24 GDP growth at a whopping 8.2%. To spice up the story further, the fiscal deficit for FY24 came in at just 5.6% of GDP, 20 bps lower than the revised fiscal deficit target of 5.8% of GDP. This fiscal prudence is likely to go down well with the equity and bond markets; although we will get to see the impact only next week.

BOND YIELDS FALL SHARPLY IN MAY 2024

For the month of May 2024, the 10-year benchmark yields started off at around 7.16%, but fell sharply after the RBI announced its bumper dividend of ₹2.11 trillion to the Indian government. That is hardly surprising. The surge in the RBI dividend by more than 100% above the interim budget estimates means that the government now has the ammunition to push the fiscal deficit even below the initial FY25 fiscal deficit estimates of 5.1%. Alternatively, it is also possible that the government may choose to use these funds to enhance their capex outlay for the year. For FY25, the government had cut the capex growth from 30% to 11%. However, this additional dividend boost allows the government to set the capex growth at 20% for FY25. If you add the lower 5.6% fiscal deficit for FY24, we could see the bond yields tapering further from current levels. That should be value accretive to equities and pave the way for rate cuts by the RBI after the full budget in July.

Equity Large-Cap Funds