In our last update on 26 December 2018, equity exposure was increased to 60 per cent (from 50 per cent) despite the risk associated in the economy and the weak outlook in the 1Q2019. During the three months (26 December – 2 April) the ASPI dipped by seven per cent, with panic selling among all fronts on the back of weak earnings.
However, the market has recovered over 130 points in the last six days, signaling a bottoming-out effect. We recommend increasing equity exposure upto 80 per cent reducing cash allocation from 40 per cent to 20 per cent, on the backdrop of the positive developments on the liquidity, external sector, possible rate cut and potential foreign inflows.
As we gradually turn BULLISH on stocks, we recommend investors to accelerate accumulation into blue chip counters, which are trading at heavy discounts. For investors who are already into equities, we believe this is an opportune period to increase exposure and average the existing portfolios. On a broader note, we expect market returns to be positive over the next few quarters, with the ASPI edging back towards the 6,000 mark with some resistance towards 5,800.