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Business News/ Money / Calculators/  Monthly market commentary: July
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Monthly market commentary: July

Though the market did correct on the budget day, it has recoved smartly since then

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Global capital markets have been weighed down by tensions in Iraq and Ukraine for the past few weeks. There are also possibilities of higher interest rates and the end of monetary easing in the US, as well as chances of slower-than-expected growth in the euro zone. Falling unemployment in the US and higher inflation is expected to lead to a rate hike sooner than forecasted. This can dampen the return expectation from developed markets and also the sentiment around easy liquidity lending support to asset prices. Though growth fundamentals haven’t quite shifted yet, it’s the expectation which is playing up in the markets.

As a result, investor focus is shifting to emerging markets. According to data from global funds tracker, EPFR, by mid-July redemptions from EPFR Global-tracked High Yield Bond Funds were at their highest level in over a year while Europe Equity Funds posted back-to-back weekly outflows. Other developed market equity funds, too, witnessed outflows and money moved into emerging market equity funds, which continued to see inflows throughout July. Data also shows that more than $2 billion worth of retail money poured into EPFR Global-tracked Asia ex-Japan Fund and Global Emerging Markets (GEM) Equity Fund. This is the highest inflow seen in over 18 months.

Back in India, the much awaited Budget was presented in July. There were no surprises on any front, as markets expected the government to maintain the fiscal deficit target. However, the lack of big bang announcements left some wanting more. Nevertheless, overall sentiment is to wait it out and give the government a few more months to bring about the much needed policy changes. Though the market did correct on the Budget day (10 July), it has recoved smartly since then. Parallelly, economic data has been turning positive—Index for Industrial Production (IIP) for May grew 4.7% and Consumer Price Index inflation for June cooled down to 7.31%.

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Published: 07 Aug 2014, 05:40 PM IST
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