We look at returns of various asset classes such as equity, debt, gold, crude oil and the Indian rupee in our latest monthly market summary.
Equities continue to outperform across the globe. All major indices rallied strongly in the month of May. This is on the back of double digit performance over the last year across nearly all markets, as can be seen in the chart above. The broader emerging markets in particular have posted spectacular returns of almost 25 per cent in the last year. Both the Sensex as well S&P 500 also continue to outperform their peers on a long term basis. While these returns are great, it is difficult to tell how much longer this rally will continue, given the expensive valuations of Indian stocks as well as for the US stock market.
The 10 year G-sec yield has been steadily been moving up from a low of roughly 6.2 per cent post demonetisation in November, to almost 7 per cent at the end of April. The month of May showed a healthy correction, with bond yields falling below 6.7 per cent. The upcoming GST legislation is likely to have an inflationary impact on the economy and we would have to look to cues from the next RBI policy as to the trajectory of rates going forward.
Gold continues to trade in the 1200-1400 dollars per ounce range. A strong move of gold outside of this range would give a better indication of its long term trend.
Oil has traded roughly in the 50-55 dollars per barrel range since the beginning of the year. While the commodity fell below 50 in April, the commodity bounced back above 50 in May. Oil would need to fall much further for there to be a significant change in trend. Because of our large dependance on oil imports, it is hugely beneficial if oil continues to remain in this range or even corrects to lower levels.
The Rupee depreciated slightly against the Euro and the Yen in May, but was broadly stable against the Dollar and the Pound.
Rishad is the founder of Kairos Capital. He started his career with Standard Chartered Wealth Management and has extensive experience in markets, particularly in terms of mutual funds and stocks.