Executive Summary

• Global Full scale lock down (like in March to May) not the base case scenario Global markets likely to be well anchored as economies gradually open up, supplemented by central banks, willing to extend monetary easing that underpins fiscal expansion.Outperformance of cyclicals vs defensives (since market lows in March) indicate markets envisaging improvement in growth prospects as economies re open
• India Local markets (have responded to global markets) have seen sharp recovery (up 40 from bottom), reducing margin of safety from a near term perspective Markets in about few months shall roll over to discount FY 22 earnings which is likely to see an improvement (albeit on a lower base).Therefore, given elevated positioning reduced margin of safety, risk reward for equities doesn't look very attractive from short term perspective but valuations remain attractive for long term

Equity Strategy

• Tactical Maintain a defensive bias in short term Investors who found it difficult to tolerate the sharp volatility of March should raise some cash positions in short term
• Strategic Equities have good potential to outperform bonds in long term Prefer Sector leaders, diversified space with very gradual allocation opportunity in Mid Smalls

Fixed Income Strategy

• Given a very steep yield curve, with rates generally on the lower side, move to lower duration from short duration to minimize MTM risk if indeed growth makes a sharper recovery than expected

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