The first quarter of 2017 contained a lot of news (as well as noise) around Donald Trump and how he is fairing as a president. Markets continued in a positive manner on the back of his campaign rhetoric regarding tax reforms and deregulation. However, towards the end of the quarter doubts started to form amongst investors - relating to the efficacy which Trump will be able to deliver on his promises. Very little has in fact been implemented to date and the jury is still out. As a result the reflation trade lost momentum towards the end of the quarter, specifically in Europe. Economic data from across the globe has been improving over the quarter; ''soft data'' has seen significant improvements whereas the hard data has been lagging and is much more moderate in magnitude. Going into the second quarter investors are eagerly waiting for the hard data to confirm the recovery. While it is widely acknowledged that the economy is showing signs of improvements, risks to the global economy have not disappeared. One of these risks for equity markets going forward is a significant increase in inflation without the accompanying earnings growth. Going forward the French elections could be a massive shock to markets specifically if Le Pen comes to power, however market participants are ascribing a very low probability to such an event. On the other hand, it seems that the recent perceived market shocks, those events which were perceived as a negative at the time, namely Brexit and the Trump victory, has sent equities to all-time highs while volatility has descended to all-time lows. That being said, the bond markets have not agreed with the rosy picture that equities have painted in the first quarter of 2017, and also advanced over the quarter.

For the quarter, Indian equity markets, as measured by the MSCI India Index, rose 17.12%. India continues to be supported by international inflows, which together with improving liquidity have been the biggest contributors to a very strong quarter. In fact, there was very little in terms of negative news from the country. Over the quarter the government central party consolidated more power by winning key state elections, which has aided the government’s ability to pass bills it has been proposing. India also experienced better earnings data over the quarter and the demonetisation implemented in the previous quarter, which caused an equity selloff, was less negative than initially feared. GDP remains high and estimates from the Finance Ministry is north of 7.5% for 2018. For the calendar months of January, February and March the index returned 4.35%, 5.90% and 5.98%.