Positive Negative Neutral
|Inflation (CPI - India)||Inflation slightly increased at 7.41% in Sep, 2022 from 7% reached in Aug, 2022. Still remains above RBI's upper tolerance level of 6%.|
|Brent Crude||Brent crude prices increased by 6% In Oct, 2022 trading below $100.|
|Currency USD/INR||INR depreciated by 1.5% in Oct, 2022|
|FII Inflows||FIIs were Net-Sellers of Indian equities to the tune of Rs.8 Cr in Oct, 2022.|
|DII Inflows||DIIs poured Rs.9,277 Cr into Indian equities in Oct, 2022|
|G-Sec Yield||Yield increased to 7.41% from 7.34% in Oct, 2022 end.|
|Global - Inflation||US inflation has slightly cooled off at 8.2% in Sep 2022 from 8.3% in Aug,2022.|
|Valuations-PE||It stood at 23.96 times in Oct 2022, 23.96% off from peak of the market in Oct, 2021.|
|Valuations-PB||It stood at 4.23 times in Oct 2022, 8.64% off from peak of the market in Oct, 2021.|
High Risk Moderate Risk Low Risk
|RISK FOR EQUITIES||LEVEL OF RISK|
|US FED - Tightening|
|US FED - Interest rate hike|
|RBI-Sucking out liquidity|
EVENTS, NATURE OF IMPACT & ANALYSIS
Indian Equity market is Standing Strong Amidst Global Issues
Indian equity market is outperforming other major equity markets
Remarks: CY 2022 is all about global economic downturns attributed to Russia-Ukraine conflict, extensive covid lock down in China, supply chain constraints, high inflation, high interest rate, currency depreciation etc.
Amidst these macroeconomic issues, Indian equity market has shown resilience and has outperformed other major markets so far. Despite FII outflow of ₹ 1.68L Cr. YTD, Nifty 50 has delivered a positive return of 2%+ YTD. Increasing MF SIP book, high DII inflows of over ₹ 2.5L Cr. and support from retail investors have held the market so far.
Highest ever DII Inflows in a Calendar Year
DIIs have poured over ₹ 2.5L Cr this year which is the highest ever inflows in a CY till date.
Remarks: The Covid-19 pandemic changed a lot of things in the world. Indian equity investors experienced high volatility & sharp corrections in the market and hence become more resilient in equity investments. They are shifting their investments from physical assets to financial assets. They are taking advantage of every correction and this bullishness is due to the India Growth Story. MF SIP book has increased over the years (₹ 44k Cr in FY16-17 to ₹ 1.24L Cr. in FY21-22).
Shift of Sector Leadership
Leading sectors in 2021 have suffered while domestic focused sectors are leading in CY2022.
Remarks: Historically, in every bull market, there are different sectors which lead the market upward. Post Covid rally in 2021 saw export oriented/global linked sectors like IT (58%) & Metals (69%) leading the market. However, in CY2022, domestic focused sectors like Banks (13%), FMCG (18%) & Auto (20%) are leading the market.
Stagnation of All Asset Class
CY 2022 has produced hardly any return for any asset class.
Remarks: It is a consensus that equity & debt returns are inversely corelated. When equity market is in uptrend, debt underperforms and vice-versa and thus asset allocation plays a vital role in overall portfolio return.
However, the current period (CY2022) has hardly ANY return in ANY asset class. These are times when we are experiencing portfolio stagnation despite optimum asset allocations.
Inflation is Cooling-Off
Supply chain constraints and natural gas were the major factors for high inflation this year. Normalization of both these factors will cool-off the inflation.
Remarks: The global market for container ships and freight containers were the biggest sources of higher input cost during Covid -19 and the Russia Ukraine conflict. The global supply chain pressure index (GSCPI) shows a drastic cool-off as rates of freight containers and container ships corrected by 67% and 68% from last year’s peak.
Another major factor of input price pressure was the surge in natural gas price especially in the Eurozone. Amidst the Russia-Ukraine conflict, the gas prices have surged 10x. It is now normalizing owing to full storage in EU and lack of demand. This will give a relief to the supply side pressure resulting in a cool-off of inflation.
Global Supply Chain Pressure Index (GSCPI)
Supply chains were one of the biggest factor which caused an inflation spike and forced central banks to hike rates at a record pace. This is now quickly getting adjusted lower.
Natural Gas: The Most Adversely Impacted Market is Normalizing
EU Natural Gas spot prices have crashed owing to full storage in EU & lack of demand due to a benign start to the winter. Even the next month prices are now cracking lower as supply chains shift from Russia to US LNG.
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.