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Mutual Funds Investment, India:

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A rally struck down | BNP Paribas Mutual Fund

A rally struck down

Stock markets in India and overseas traded the week with a bullish undertone after US President Donald Trump said that Phase 1 of the trade deal with China would be signed on 15 January. An apparent thawing of trade relations between the two nations brought the “risk-on” sentiment back into the markets. Additionally, the Indian government's INR 102 lakh crore infrastructure push to realise the USD 5 trillion GDP goal also boosted sentiment. However, on the last trading session of the week, shares across the globe traded under pressure as geopolitical tensions flared after a U.S. airstrike in Iraq killed a top Iranian commander.

Macro-economic Developments

Macro-economic developments announced during the week were mixed, precluding the emergence of a trend. The IHS (Information Handling Services) Nikkei India Manufacturing Purchasing Managers' Index rose to 52.7 in December 2019 from 51.2 in November 2019. The reading was the highest since May 2019. India's factory activity expanded at its fastest pace in seven months in December 2019 as a jump in new orders prompted companies to ramp up production.

On the other hand, India’s core sector contracted for the fourth consecutive month in November 2019, however, the pace of contraction slowed to 1.5% from 5.8% in October 2019 led by growth in the output of fertilizer, cement and refinery products, raising expectations of industrial production moving into the positive territory.

Meanwhile, India’s fiscal deficit widened further in November 2019 to INR 8.07 lakh crore (114.8% of the budgeted estimate) raising concerns that the country would breach its budgeted target for the third straight year. Foreign direct investment (FDI) into India grew 15% to USD 26bn during the first half of the current financial year.

Global Developments

The positive global sentiment was severely impacted after the U.S. airstrike on Iraq resulted in the death of a top Iranian leader. In the commodities market, Brent crude futures spiked by nearly USD 3/barrel to hit a high of USD 69.16/barrel, the highest since 17 September 2019. The crude futures spiked after a US airstrike killed key Iranian and Iraqi military personnel, raising concerns that escalating Middle East tensions may disrupt oil supplies.

Institutional Activity

Institutional activity in the last month of the year was tepid due to a paucity of triggers and Christmas holidays in most parts of the globe. During December 2019, foreign institutional investors net bought Indian equities worth INR 694.12 crore. In the same time period, domestic institutional investors net sold Indian equities worth INR 740.76 crore.


Disclaimers: The material contained herein has been obtained from publicly available information, internally developed data and other sources believed to be reliable, but BNP Paribas Asset Management India Private Limited (BNPPAMIPL) makes no representation that it is accurate or complete. BNPPAMIPL has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as 'will', 'would', etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BNPPAMIPL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. The words like believe/belief are independent perception of the Fund Manager and do not construe as opinion or advise. This information is not intended to be an offer to sell or a solicitation for the purchase or sale of any financial product or instrument. The information should not be construed as an investment advice and investors are requested to consult their investment advisor and arrive at an informed investment decision before making any investments. The Trustee, Asset Management Company, Mutual Fund, their directors, officers or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document.

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

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