Positive Negative Neutral
|Inflation (CPI - India)||Inflation slightly increased at 4.81% in June, 2023 from 4.31% reached in May, 2023.|
|Brent Crude||Brent crude prices increased by 13.80% In July, 2023|
|Currency USD/INR||Rupee depreciated by 0.18 % in July, 2023|
|FII Inflows||FIIs were Net-buyers of Indian equities to the tune of Rs.46,618 Cr in July, 2023|
|DII Inflows||DIIs sold Rs.1,184 Cr worth of Indian equities in July, 2023.|
|G-Sec Yield||Yield slightly increased to 7.17% from 7.11% in July, 2023 end.|
|Global - Inflation||US inflation has slightly cooled off at 3% in June 2023 from 4.1% in May 2023|
|Valuations-PE||It stood at 23.01 times in Jul-2023, -22.43% below Oct, 2021 peak.|
|Valuations-PB||It stood at 4.83 times in Jul-2023, 4.15% slightly higher than Oct, 2021 peak.|
|Valuations - Market cap to GDP ratio||Current market cap to GDP ratio is at 105%, above its long-term average of 80% but below the peak valuation of 113% in FY 2022.|
High Risk Moderate Risk Low Risk
|RISK FOR EQUITIES||LEVEL OF RISK|
|Rising Oil prices & Commodity inflation|
|FII's being a Net-Seller|
|US FED - Tightening|
|US FED - Interest rate hike|
|RBI-Sucking out liquidity|
EVENTS, NATURE OF IMPACT & ANALYSIS
US long-term credit rating declines from AAA to AA+
Fitch downgrades U.S. long-term credit rating from AAA to AA+ for the first time since 2011.
Remarks: As per Fitch report, they expect the fiscal deficit in the US to rise to 6.3% of GDP in 2023 from 3.7% in 2022, and it also expects one more rate hike by September which adds more pressure on ratings.
Along with that repeated debt-limited political standoffs have eroded confidence in fiscal management, due to which Fitch has made it clear that failure to address governmental spending issues and macroeconomic policy could lead to MORE negative revisions.
We are of the view that ballooning of US debt pile always remains a concern especially during rising bond yields and interest rate upcycle scenario. Everyone is aware of this issue, but Fitch has acted lately
Having said that, since India’s domestic macros and fundamentals are in good shape, we need to be more vigilant on GLOBAL macro-economic headwinds going forward. Any global macro headwinds will create short term impact on Indian equity market as well as on overall economy.
Contradicting US Macroeconomic Indicators!
There are contradicting signals from the US macroeconomic indicators.
These are contradicting macro-economic signals from US economy and as mentioned above, macro headwinds from the US markets have the potential to impact Indian equity market as well as Indian economy, but alongside it will create opportunities as well. We need to be mindful on near term risks to deploy fresh capital into equities and it needs to be spread for a longer period.
Robust FII Inflows!
FIIs turned bullish on India in Mar 2023 and since then, they have poured Rs. 1.57 lakh Cr in 5 months.
The past 5 months return from Indian equities (SENSEX & NIFTY 50) are 12.83% & 14.16% respectively. Meanwhile, NIFTY Midcap 100 & Smallcap 100 have rallied 25% & 28% respectively. It was driven by massive FII inflows into Indian equities to the tune of Rs.1.57 lakh Cr from Mar-2023 to Jul-2023.
India is truly an oasis in the desert. Our stable macro-economic parameters as well as resilient Indian corporates in terms of business quality, ongoing earnings uptick, and strong balance sheets attract foreign Investors to the maximum extent. The struggling Chinese economy also led the exodus of foreigners from China to India.
Since India’s growth story is structural in nature, we are of the view that FII inflows will continue further over a long period despite various global macro headwinds.
Corporate Leverage at 15 Year Low
Indian corporates have deleveraged their balance sheet and now, the aggregate debt to equity ratio of top 600 companies stands at 0.53%.
Many corporates across the sectors have deleveraged their balance sheet, especially metal companies, since there was a boom in commodities in 2021, majority of metal companies have deleveraged their balance sheet. Simultaneously, corporate bank’s balance sheets have also been cleaned up & their NPA levels are at historical low.
We are of the view that the resilient corporate balance sheet as well as cleaned up balance sheets of banks are perfect recipe for the upcycle of private capex. As of now, the capex cycle is led by Govt, and we expect that private capex will also start accelerating going forward.
Can this year’s Monsoon become a cause for Inflation?
India as a whole country received 5% excess rainfall during this year’s first half of the monsoon season from 1st June-2023 to 31st July-2023.
States, such as Rajasthan, J&K, Himachal Pradesh, Punjab, Delhi, Gujarat, Goa, Telangana have received “surplus” amount of rainfall till end of July whereas there is a “deficit” in Kerala, Jharkhand, Uttar Pradesh, West Bengal, and Bihar. The rest of the states in the country have received “normal” amount of rainfall.
Although India as a whole country has received 5% excess rainfall during this year’s first half of the monsoon season, state wise rainfall is not linear. However, as there are still two months in this monsoon season, RBI does not expect any impact on inflation due to irregular monsoon.
What you should do. And should not.
Please remember investing is mostly backing quality businesses run by quality managements that offer a runway for strong cash flow growth, earnings potential, and long-term prospects. Buying them at a “reasonable” price with an eye on the returns is important. Stay invested, stay disciplined and secure your returns. We have prepared a sound long term holistic financial plan for you based on your risk profile, defined your financial goals along with you… did an asset allocation (with contingency plans built in) with you. We believe we are in the best objective position to help navigate the vagaries of the market.
Standard Warning & Disclaimer: