Positive Negative Neutral
|Inflation (CPI - India)||Inflation decreased at 4.77% in Apr, 2023 from 5.66% reached in Mar, 2023.|
|Brent Crude||Brent crude prices decreased by -9.52% In May, 2023|
|Currency USD/INR||Rupee depreciated by 1.17% in May, 2023|
|GDP||GDP growth of India is reported at 7.2% for FY23, beats RBI estimate of 7%.|
|FII Inflows||FIIs were Net-buyers of Indian equities to the tune of Rs.43,838 Cr in May, 2023|
|DII Inflows||DIIs sold Rs.3,306 Cr worth of Indian equities in May, 2023.|
|G-Sec Yield||Yield slightly decreased to 6.989% from 7.116% in May, 2023 end.|
|Global - Inflation||US inflation has slightly cooled off at 4.9% in Apr 2023 from 5% in Mar 2023|
|Valuations-PE||It stood at 21.59 times in May 2023, -30.98% below the Oct, 2021 peak.|
|Valuations-PB||It stood at 4.33 times in May 2023, -6.93% below the Oct, 2021 peak.|
|Valuations - Market cap to GDP ratio||Current market cap to GDP ratio is at 95%, 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
Weathering Global Storms: India Inc.'s Q4FY23 Shines with Profitability!
Amid a challenging global economic landscape, India Inc. maintained strong profitability in Q4FY23.
Remarks: Even during this global economic turmoil, India Inc. Demonstrated resilience and showcased impressive performance in the fourth quarter of FY23.
Among the Nifty 50 companies by sales, a staggering 12 companies surpassed market expectations while 35 companies delivered results in line with expectations; only 3 companies fell BELOW market expectations! The following data shows the breakup by sales, by EBITDA and by PAT level.
The PAT analysis of the Nifty 500 companies reveals a remarkable fact: Basis absolute profit after tax, the top 100 companies account for 85% of the total PAT of the Nifty500. This pattern of concentrated profitability signifies the strength and competitiveness of these top companies, showcasing their ability to thrive and generate substantial earnings even during challenging times. Furthermore, it reflects the broader narrative of a self-reliant India and the India Growth Story.
The strong economic growth, rising consumer demand, impressive export performance, and reduced dependency on imports in various sectors have all contributed to this resilience.
Is The World Heading Towards a Recession?
Many major economies in the world are exhibiting a high inflationary, high interest rate scenario which may lead towards a recession. But India is standing strong.
Remarks: The global economic situation is currently presenting numerous challenges, indicating a potential recession soon. Factors such as high inflation, weakened demand, currency depreciation, elevated interest rates contribute to this uncertain outlook.
Bloomberg's recession probability data supports these concerns, highlighting that several major economies are at risk of entering a recession.
As evidenced by the Bloomberg report above, India is emerging as a resilient player, demonstrating strength and stability. The country's domestic consumption remains robust, supported by increased exports. In the recent past, India also managed to tackle the impact of global macro headwinds like currency depreciation and rising crude prices efficiently. Additionally, India benefits from deleveraged corporate balance sheets, sustaining economic growth and stability.
India’s GDP Growth Beats Estimates in FY23
The recent GDP data shows a 6.1% growth in Q4 against the RBI estimate of 5% and the FY23 growth rate stood at 7.2% vs RBI estimate at 7%.
India's GDP growth for FY2022-23 stood at 7.2% surpassing RBI’s expectations of 7%. Despite challenges posed by the global economic environment, India outperformed projections, reflecting resilience and strength of our economy. This robust growth demonstrates the effectiveness of India's policies and initiatives in driving economic progress and attracting investment. Various policies such as Make in India, Atmanirbhar Bharat, PLI Schemes, timely recognition of bad & doubtful debts played a vital role in this context.
The US Equity Market is on a Verge of Recovery
The US equity market collapsed in CY2022, but it’s heading towards a recovery in CY2023 till now.
In CY2022, the Nasdaq 100 index, consisting of global tech giants, experienced a significant collapse following a massive rally post-COVID. This decline was attributed to a series of macroeconomic factors, including supply chain disruptions due to extensive lockdowns in China, the Russia-Ukraine conflict, high inflation, high interest rates, and issues within the US banking sector. Looking ahead to CY2023, the US equity market appears comparatively favorable.
However, the sustainability of the recovery raises questions. Although inflation has cooled off to 4.9% from its peak of 9.1% in June 2022, it remains above the Federal Reserve's target range of 2% to 3%. Food and shelter inflation remains high at around 8%, leaving uncertainty about whether US interest rates have peaked. There is a possibility that the Federal Reserve may raise rates another one or two times, which would be unfavorable for the equity market.
But, Be Prepared for Volatility
Beyond the above, always remember investment journeys in equity markets are never smooth, Known risks are known to everyone, but unknown risks are … well unknown!
While India's performance in the global economic landscape remains strong, it's important to acknowledge that the equity market is inherently volatile. Short-term fluctuations and uncertainties are inevitable, influenced by various factors such as economic indicators, geopolitical events, and market sentiment.
Investors must be prepared for volatility, adopting a long-term perspective and making informed decisions based on their risk tolerance and investment goals. By staying vigilant, staying informed, and maintaining a disciplined approach, investors can navigate the volatility and potentially capitalize on opportunities for long-term growth.
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: