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Markets relying on hope in the near-term | BNP Paribas Mutual Fund

Markets relying on hope in the near-term

Stock markets in India started the week on a negative note but subsequently turned positive as sentiment picked up in response to various global developments. Weak global cues including US-China trade tensions and political unrest in Hong Kong also kept markets under pressure. While the rising coronavirus cases in India remain a cause for concern, markets continue to draw hope from the stimulus packages announced in India, as well as, globally. Positive global cues including reports of a gradual resumption of business activities in major countries across the world also boosted investor sentiment. Further, markets traded on a volatile note on account of the expiry of May futures and options contracts.

Domestic Update

Indian markets got a shot in the arm after China on Wednesday said that the situation at the border with India is "overall stable and controllable," and both the countries have proper mechanisms and communication channels to resolve the issues through a dialogue and consultation. However, growth concerns persist and continue to cast a shadow on market sentiment. As per a Reuters poll, India's economy grew at 2.1% in Q4 FY20 from a year ago, it's weakest since comparable records began in early 2012 and sharply slower than the 4.7% growth witnessed in the previous quarter, partly as a result of the coronavirus clampdown. Additionally, foreign funds have significantly reduced their holdings of India's government bonds to the lowest in 3 years amid dwindling returns, just as the country embarks on a gigantic borrowing plan.

Global Update

Global developments were mixed contributing to both hope and concern. Growth figures in leading economies continue to cast a pall of gloom. US gross domestic product (GDP) fell at an annual rate of 5% in the first quarter of 2020 compared to 2.1% growth in the previous quarter. Across the pond, Christine Lagarde, the European Central Bank (ECB) President said that the Eurozone economy is likely to shrink between 8% and 12% this year as it struggles to overcome the impact of the coronavirus pandemic. On the other hand, the announcement of new and larger stimulus packages kept markets afloat. During the week, Japanese Prime Minister Shinzo Abe's cabinet approved a new USD 1.1 trillion stimulus package that includes significant direct spending, to stop the coronavirus pandemic from pushing Japan deeper into recession.

Institutional Activity

Institutional activity during the week has been robust, with both foreign portfolio investors (FPIs) and domestic institutional investors (DII) turning positive on Indian equities for the week. For the period 22nd May 2020 to 28th May 2020, FPIs have net bought Indian equities worth ~INR 5382 crore. In the same time period, DIIs have net bought Indian equities worth ~INR 5050.6 crore. For the month of May 2020, FPIs have so far bought Indian equities worth INR 12,454 crore while DIIs have net bought Indian equities worth INR 11,326 crore.

www.nseindia.com  | bloomberg.com

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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