Financial Market @ September 2022

 

Corporate earnings in Q1FY23 came below expectations. On one side Bank led the earnings growth trend buoyed by credit cost moderation and loan growth momentum. On the other side sectors like, Oil & Gas, metals, healthcare, cement led to reduction in EPS estimates. Technology & Real estate too shown decline in YOY earnings.

Globally, pandemic and geopolitical conflicts have sparked inflationary conditions through excess stimulus and commodity price shocks. It has in turn warranted higher rate regime. Fears of Global recession (decrease in oil demand by European countries) and covid lockdown in China are impacting demand are keeping energy prices in check.

Equity Outlook:

So far so good. Domestic macroeconomics strength is reflected in a way Indian equities have substantially outperforming the emerging markets and has shown relatively better resilience to global market shocks. The country weight for India has inched from 6% in 2020 to 14.50% by August 2022.

Investor should participate in staggered manner or systematically for the long term.

Debt outlook:

Establishing price stability is taking precedence over short term growth in order to achieve long term goal. The monetary policy measures will be aimed at anchoring inflation expectations. We expect terminal rate to be lower at 6% to 6.25% by end of FY23.

Domestic growth is expected to hold up in the months to come. Broad domestic Market movement is expected to be range bound between 21 PE to 25 PE until inflationary pressure is there in economy…

Happy Investing

(Inputs from Franklin Templeton has been given weightage in reading global economy including India) 

Financial Market @ April 2022

 

Equity Market:

RBI has trimmed the real GDP growth forecast for FY23 to 7.20% from 7.80% estimated earlier.

Continuation of the geopolitical conflict causing supply chain disruption and high global commodity prices for longer may weigh on the fiscal situation, trade deficit and currency weakness.

High oil prices may place a drag on the cyclical recovery for Indian economy.

On the positive side, various domestic macro factors such as tax revenue growth, improvement in consumption and industrial high frequency indicators, e.t.c. remain supportive of the economic growth.

Markets are on expected lines, searching for support levels. World is waiting for the war to end, so as India. With the ease in energy prices new opportunities will be driving the markets.

SIP / STP are the valuable tools to participate in the market rather sitting on sidelines…

Debt Market:

RBI has raised inflation forecast for FY23 to 5.70% from 4.50%, due to broad based jump into global energy, commodities and food prices.

The RBI intends to reduce the liquidity in gradual and calibrated fashion over multi-year time frame.

We can see 3 to 4 rate hike in this financial year by the Central Bank.

Given the expected rate hikes, gradual reduction of liquidity and substantial supply of Govt. securities, yields are expected to harden further in future.

As it is, stay invested in shorted end of the yield is always a defensive approach and we are maintaining the same going forward suggesting Floating rate funds for conservative outlook.

Happy Investing!

(Blog has inputs from Franklin Templeton)

 

 

Budget 2022 - Disseminated

 

The attempt to lift the economy from vagaries of the pandemic-led slowdown, the Union Budget for FY- 2022-23 focused on right kind of spending of its scant resources on the physical and digital infrastructure, to keep up the recovery momentum intact. The Budget is encircled around three key themes - Infrastructure, Digital and Manufacturing.

 A few key highlights are enumerated below for your kind reference with our perspectives on the Union Budget which also includes our Equity and Fixed Income market outlook

 1. Nominal GDP growth estimated at 11% for FY23.

2. Fiscal deficit estimate pegged at 6.9% of GDP for FY-22 and 6.4% for FY23.

3. Net market borrowing of government bonds for FY-23 estimated at INR 11.59 Lakh Cr vs INR 8.76 Lakh Cr in FY22.

4. Disinvestment receipts for FY23 pegged at INR 65,000 Cr, vs INR 78,000 Cr for FY-22.

5. No change in Direct Tax; Income from transfer of virtual assets (like crypto currencies) to be taxed at 30%.

6. Cap on surcharge on long term capital gains arising on transfer of any type of assets at 15%.

7. National Tele Mental Health Program to be launched for quality counseling.

8. Proposed issuance of sovereign green bonds as part of government’s borrowing program in FY23.

9. Digital Rupee, using block chain technologies to be issued by the RBI starting 2022-23.

10. 100% of post offices to go digital and will come on the core banking system.

 Equity Market Outlook - The tight-rope fiscal walking could have been augmented with steps to drive growth through higher private spending and capex. What the budget delivers in terms of being fiscally pragmatic and being non-inflationary, it falls short on efforts to stimulate aggregate demand. The PE valuations of stocks are expected to get corrected with the fourth quarter result. Sensex may be on lean pitch, considering the advance tax season which results in liquidity crunch, creating good opportunity to participate for long term objectives.

 Fixed Income Outlook - Bond yields may continue to inch higher in the backdrop of increasing crude oil price, higher inflation, geopolitical tension, higher supply of government bonds, and an exit from the prevailing loose monetary policy globally. Market will closely watch the upcoming RBI monetary policy. Shorter duration funds are the order of the day.

(Note: Valuable inputs have been taken from Franklin Templeton & HDFC Mutual Fund reports on Budget)