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DISCLAIMER: The analysis, comments, views, opinions contained herein are for informational purposes only and should not be construed as an investment advice or recommendation to any party or solicitation to buy, sell or hold any security or to adopt any investment strategy. The information provided is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is prohibited or which would subject the AMC or its affiliates to any registration requirement within such jurisdiction or country. It shall be the sole responsibility of the viewer to verify whether the information expressed herein can be accessed and utilized in their respective jurisdictions. The comments, opinions and analyses are rendered as of the date and may change without notice. The viewers should exercise due caution and/or seek appropriate professional advice before making any decision or entering into any financial obligation based on information, statement or opinion which is expressed herein. The AMC does not warrant the completeness or accuracy of the information disclosed in this section and disclaims all liabilities, losses and damages arising out of the use of this information.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
DISCLAIMER: The analysis, comments, views, opinions contained herein are for informational purposes only and should not be construed as an investment advice or recommendation to any party or solicitation to buy, sell or hold any security or to adopt any investment strategy. The information provided is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is prohibited or which would subject the AMC or its affiliates to any registration requirement within such jurisdiction or country. It shall be the sole responsibility of the viewer to verify whether the information expressed herein can be accessed and utilized in their respective jurisdictions. The comments, opinions and analyses are rendered as of the date and may change without notice. The viewers should exercise due caution and/or seek appropriate professional advice before making any decision or entering into any financial obligation based on information, statement or opinion which is expressed herein. The AMC does not warrant the completeness or accuracy of the information disclosed in this section and disclaims all liabilities, losses and damages arising out of the use of this information.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

April 2025

Macro Economic Review
 
 

Global uncertainty remains high as USA announced tariffs on all its trading partners on April 2nd. Subsequently, while US has provided a 90-day pause on tariffs on all countries (except its largest trading partner China), uncertainty remains high on future direction. Higher tariffs are expected to be disruptive for the global trade order & growth. On the inflation front, while USA may see an inch up, other countries will see a deflationary impact with growth slowdown and correction in commodity prices. Amidst the global turmoil, Indian economy remains relatively more resilient, supported by a domestic focused economy, improving government spending, low inflation and higher banking system liquidity.

US GDP posted a surprise de-growth of 0.3% q-o-q during January – March 2025, on account of frontloading of imports before the trade tariffs kicked in. Excluding the imports impact, the US economy remained resilient with domestic final sales being strong at 2.3% and jobs market remaining strong. US labor market remained tight as reflected in US’s non-farm payrolls coming in higher than expected at 177k vs median expectations of 138k. The unemployment rate remained steady at 4.2%, while the average hourly earnings increased by 0.2% m-o-m (vis-à-vis 0.3% in the previous month). US’s manufacturing PMIs remained steady at 50.2 in April and has remained in expansionary zone for the 4th consecutive month. However, the services PMI declined to 51.4 in April (vs 54.4 in the previous month); while remaining in expansionary zone every month for the past year. US’s retail sales inched up to 4.9% in March (vs 3.9% in the previous month). However, US consumer sentiment index amidst tariff led overhang, has come down sharply to 52.2 in April vs 57.0 in March and an average of 64.2 in the quarter Jan – March 2025. US CPI also came in marginally lower than expected at 2.4% vs 2.5% expectation, reflecting growth moderation. Core inflation also moderated, though still elevated at 2.8% vs 3.0% expected.

India’s CPI for March softened more than expected to 3.34% vs 3.61% in the previous month, largely led by food inflation moderating to 2.8% y-o-y vs 3.8% in previous month. Sequentially also, food inflation declined by 0.7% m-o-m, marking the 5th consecutive month of decline in food prices, led by sharp correction in vegetable prices. However, Core inflation inched up to 4.2% from 4.08% in previous month, largely driven by increase in gold prices. With the expectations of healthy Kharif crop and normal monsoon, CPI is expected to remain below RBI’s comfort level of 4%. Core inflation may still remain marginally above 4% with the higher gold prices and base effect. Global uncertainty around tariffs and resultant impact on growth could lead to faster moderation in inflation.

Manufacturing Purchasing Managers' Index (PMI) for April inched up to 9-month high of 58.2 vs 58.1 in the previous month driven by new business growth, supported by strong domestic and international demand. Services PMI also edged up to 58.7 in April vs 58.5 in the previous month, driven by an increase in the new business index. The new export orders increased to a nine-month high, with the firms reporting improved sales across the regions. The index of eight core industries increased by 3.8% YoY in March vs 3.4% in previous month. Six of the eight core industries reported a rise in production, whereas natural gas & crude oil registered a decline in output. Cumulative output of eight core industries increased by 4.4% for period April 2024 -March 2025, as compared to 7.6% growth recorded in 2023-24.

India’s trade deficit surprised on the upside in March at USD 21.5bn vs USD 14.1bn deficit in February, largely on the back of USD 7.1 bn rise in oil imports despite decline in global crude prices, and USD 2.1 bn increase in gold imports. Exports grew by 0.7%, with non-oil exports growing by 2.2%, offset by 9.4% decline in oil exports. Imports increased by 11.4% vs a decrease of 16.3% in previous month, driven by growth across oil (16.3%), gold (192%) as well as non-oil non-gold (2.2%) segments. Net services surplus inched up to USD 17.9 bn vs USD 17.1 bn in previous month. FX reserves at the week ending April 25 were USD 688 bn, up from USD 665 bn from the end of previous month.

Overall domestic demand and activity levels show moderation. Consumption remains weak, led by slowdown in urban consumption even though rural demand is improving. Slowdown in bank lending is further impacting consumption, though it has shown some improvement lately. Investment cycle remains firm supported by government capex. With decline in food prices, overall inflation remains well within RBI’s comfort zone and will help consumption. Global volatility is expected to remain high and growth is expected to soften amidst US’s tariff policies.

  
Equity Market
 

  

Nifty went up for the second consecutive month and went up 3.5%. Mid-cap and small-cap Indices also participated and were up 4.7% and 2.2%, respectively. It was a volatile month with a lot of news-flow surrounding US Tariffs and subsequently on the India-Pakistan geopolitical developments post terror attacks in Kashmir. The consumer durables, oil & gas and Banking sectors were up above 5% while Metals and Tech sectors relatively underperformed. Global markets ended mixed. Mexico, Indonesia and Australia were up 6%, 3.9% and 3.6%, respectively, whereas US (Dow), Hong Kong and Singapore declined 4.6%, 4.3% and 3.5%, respectively. Other key developments: (1) the RBI reduced the repo rate by 25 bps to 6% and shifted its stance to accommodative while continuing on its Open Market Operation (OMO) purchases to inject liquidity in the system, (2) the US President announced very high reciprocal tariffs on all its trading partners on April 2; which subsequently (on April 9), were 'paused' for 90 days for all except China, (3) IMD predicted above-normal monsoon rainfall this year—expected at 105% of the long-period average, with a 5% margin of error, (4) the RBI relaxed liquidity coverage ratio (LCR) guidelines, which is expected to enhance credit availability and support growth in the banking and financial sectors, (5) IMF reduced India's FY2026 GDP growth projection to 6.2%, down from its earlier estimate of 6.5%, citing growing global trade tensions and economic uncertainty. FPI flows showed positive traction in April, as FPIs bought US$ 500 mn of Indian equities in the secondary cash market, whereas DIIs bought US$3.2 bn.

High-frequency data for March was mixed with a mild improving trend at an aggregate level. Manufacturing PMI expanded to 58.2 in April 25 vs. 58.1 in the previous month. Services PMI also expanded to 58.7 in Apr’25 vs. 58.5 in Mar’25. India's goods and services tax (GST) collections surged by 12.6% to an all-time high of Rs 2.37 lakh crore during April. Power demand for the month of April came in at 2.2% on a high base. Banking sector (non-food) credit growth remained stable at 11.0% as on 4 Apr’25 vs ~11% in Mar’25 (vs 10.9% in Feb’25). The latest sectoral deployment data showed that credit growth improved in industry and services sectors in Mar’25. Retail and wholesale YoY volume growth for the month for PVs, 2Ws and CVs was low- to mid-single digit on the back of base effects due to a mismatch in the number of auspicious days to buy a new vehicle. On a YoY basis, PVs/2Ws registered retail volume growth of 5.1%/2.7% respectively. Electronics Exports for Mar’25 increased by 35.3% YoY to Rs395 bn. In the ongoing Q4FY25 result season, of the 130 companies (out of NSE500) which have announced their results so far, their aggregate Revenues and Profits have gone up by 7% and 8% respectively on a yoy basis, which is modestly ahead of expectations.

Post the “Liberation Day” tariffs announced by the US administration on April 02, there have been considerable climbdowns – deferment of tariff implementation by 90 days and rollbacks in certain industries such as semiconductors, auto components etc. This dilution of stance has been received positively by the markets and likely implies that the final tariff structures for many countries may be vastly different from their original form. While this may be the case, we reckon that the markets will nonetheless have to contend with reasonable volatility during this period and global trade is likely to move in a slow lane.

Meanwhile, on the domestic front, while growth has slowed in recent months, we expect a combination of strong liquidity measures by the RBI, a pick-up in government spending, consumption impulse from income tax cuts & good monsoon and interest rate cuts to re-energise the growth cycle. Inflation will continue to moderate over the rest of the year as core inflation remains steady. Food inflation remains high but should trend lower on back of declining agri-inflation helped by a robust Rabi crop. Further, our external position is in a good shape with a manageable current account deficit. Also, with a comfortable import cover of close to 11 months, the impact of US tariffs seems likely restricted short-term and probably beneficial long-term.

With the steep correction in the market since Jan 2025 and the subsequent recovery in April, equity market risk reward now appears evenly balanced. The market’s direction for the next few quarters will be guided by the extent of earnings acceleration for corporate India. Earnings expectations have moderated but so have valuations. A strengthening domestic growth outlook will likely support valuations hereon. Large-caps appear better placed on near-term growth/valuation metrics whereas SMID’s provide the best proposition for long-term alpha generation. Our portfolio positioning remains pro-cyclical, but preference continues for high quality companies with strong business execution.


 
 
Fixed Income Market
 
 

USA unfolded its new tariff policy against countries, which came out to be more aggressive than expected & caused heightened volatility across financial markets. China retaliated strongly while many other countries opted for negotiation route. Subsequently, USA paused the higher tariff for 90 days for countries, except China. US treasury yields declined during the month and Dollar index weakened sharply from 104.21 to 99.47 as the US’s growth concerns grew stronger. INR also strengthened against USD from 85.51 to 84.49, in line with broader Dollar weakness. Domestic G-Sec yields rallied by 5-20 bps across the curve with steepening bias, triggered by RBI’s super dovish monetary policy (with 2nd consecutive 25 bps rate cut) and RBI’s heavy Open Market Purchase Operations of G-Sec (OMOs). Corporate bond yields also rallied though relatively lesser as corporate bond supply remained elevated even in the first month of financial year. Banking liquidity remained surplus on RBI’s aggressive liquidity measures.

Outlook

USA’s aggressive tariff policy has surprised negatively and even as many countries are trying to find an amicable solution, relatively higher tariff and the ensuing overhang poses risk to global growth. US’s inflation may flare up with higher cost of imported goods, other countries may see the inflation moderating. US’s further rate cut expectations may swing rapidly depending upon its growth-inflation dynamics. Currency market may remain turbulent with risk-off sentiments.


Against the global uncertainty, Indian fixed income market has exhibited strong resilience supported by conducive fiscal as well as monetary policies. G-Sec fiscal demand supply dynamics is already favorable with continued fiscal consolidation, gets an additional boost as RBI’s Open Market Purchase Operations (OMO) of G-Sec exceeded market expectations with Rs 2.45 lac crore in first 2 months of FY26 itself. RBI’s dividend in May is also expected to exceed the budgeted ~Rs 2.2 lac cr on the back of higher accrual income and profits booked on Fx sale, thereby providing cushion to fiscal consolidation.


On monetary policy front, RBI took a pivotal turn to support growth and delivered a super DOVISH April policy with a 25 bps rate cut and policy stance change from “Neutral” to “Accommodative”. Even more critical was the commentary on inflation which came out to be very comforting after a long time. This move clearly signals RBI’s intent to support growth amid global uncertainties and readiness to implement further policy measures if necessary. Current policy rate at 6% and forward looking FY26 inflation projection at 4%, leaves the real rate at an elevated 200 bps. Given that RBI has turned its focus to supporting growth, we believe RBI may find space for two more rate cuts so as to take the real rates down to 150 bps. US’s trade policy in current form & ongoing trade tussle with China is very disruptive for global growth and will also lower the global inflation (expect US which may see increasing inflation). RBI’s Governor also mentioned during the press conference that US’s tariff may raise more concerns on growth than inflation. If tariff war continues for a longer time and global growth gets disrupted, we believe RBI will have to step in and deliver further rate cuts to bolster economic growth.


G-Sec yields have rallied sharply over last two months on the back of RBI’s OMOs announcement and increased rate cut expectations. While the yields may remain volatile amidst global factors and also on recent India’s skirmishes with a neighboring country, domestic factors remain quite supportive. Overall, risk-reward remains favorable at current juncture with favorable demand-supply and rate cut expectations. However, considering the shape of yield curve, it will be critical to position appropriately on G-Sec & Corporate bonds as we find G-Sec yield curve above 5 yr tenor and Corporate bond yield curve upto 5 yr tenor more attractive.


G-Sec yields have rallied sharply over last few weeks with 10 yr G-Sec yield coming below 6.50% on the back of RBI’s OMOs announcement and rate cut expectations. While the yields may remain volatile and react to global developments, domestic factors remain quite supportive. Overall, risk-reward remains favorable at current juncture as healthy domestic demand-supply dynamics & expectations of further rate cuts and RBI’s OMOs will help in bringing the market yields down and likely generate capital gains. However, considering the shape of yield curve, it will be critical to position appropriately on G-Sec & Corporate bonds as we find G-Sec yield curve above 5 yr tenor and Corporate bond yield curve upto 5 yr tenor more attractive. Any uptick in yields due to still evolving global factors should be seen as an opportunity to build further exposure. Active fund management is critical as uncertainties may emanate from domestic inflation and global backdrop which may influence various yield curve segments differently.







 

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Important Information: The views contained in this section are for information purposes only and should not be construed as an investment advice to any party. The views contained herein may involve known and unknown risks and uncertainties that can differ materially from those expressed/implied. The viewers should exercise due caution and/or seek appropriate professional advice before making any decision or entering into any financial obligation based on information, statement or opinion which is expressed herein. Invesco Asset Management (India) Private Limited does not warrant the completeness or accuracy of the information disclosed in this section and disclaims all liabilities, losses and damages arising out of the use of this information.
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