Financial Markets @ July 2023

 

Dear Patron,

Equity Market Review

·       In the month of Jun'23, equity markets surged significantly with Nifty 50 rising by 3.53% on m-o-m basis attributed by favourable domestic macroeconomic data and strong buying by foreign institutional investors for the month ended Jun'23. 

·       Foreign Institutional Investors (FIIs) were net buyers in Indian equities to the tune of 47,148.45 crores 

·       Goods and Services Tax (GST) shows highest ever collection of 1.61 lakh crore for Jun'23, which is 12% more than the corresponding period of last year and this points towards the growing trajectory of the Indian economy.

 Debt Market Review

Global Economy Update:

·       Macro Backdrop: 

·       Global economic activity has sustained its growth momentum in the second quarter of 2023, albeit with two diverging roads. 

·       The world composite purchasing managers’ indices (PMIs) rose to an 18-month high in May, powered by the vibrancy of the services sector. 

·       Global food prices have fallen to their lowest levels in two years, with declines in prices of grains, vegetable oil and dairy offsetting higher sugar and meat prices. 

Indian Economic Growth:

·       Macro Backdrop: 

·       India’s real gross domestic product (GDP) recorded a growth of 7.2 per cent in 2022-23, stronger than the earlier estimate of 7.0 per cent. 

·       It has surpassed its pre-pandemic level by 10.1 per cent. Real GDP growth in Q4:2022-23 accelerated to 6.1 per cent (y-o-y) from 4.5 per cent in Q3, aided by fixed investment and higher net exports. 

·       On the supply side, real gross value added (GVA) accelerated from 4.7 per cent in Q3 to 6.5 per cent in Q4, driven by rebound in manufacturing activity which moved into expansion territory after two quarters of contraction.

Inflation:

·       Global: 

·       Inflation eased further across most economies. 

·       In May, consumer inflation cooled off in the US for the 11th consecutive month to 4 per cent (y-o-y) 

·       Inflation based on the US personal consumption expenditure (PCE) index, however, edged up to 4.4 per cent in April from 4.2 per cent in March. 

 

·       India: 

·       CPI inflation moderated to 4.3 per cent in May 2023 from 4.7 per cent in April. 

·       The fall in headline inflation was driven by food and fuel sub-components while core (excluding food and fuel) inflation remained steady. 

·       CPI food inflation (y-o-y) moderated sharply to 3.3 per cent in May from 4.2 per cent in April on account of a large favorable base effect of around 145 bps, which more than offset a positive price momentum of around 55 bps. 

It’s the time we should start participating in the equity market with long term objective, weakening of dollar will be strong signal to do so going forward.

Happy Investing.

Source: RBI, MOSPI, CMIE, FIMMDA, NSDL, Bloomberg, Canara Robeco

Financial Markets @ March 2023

 

Dear Patron,

Presently market is treading between inflation and growth. Inflation in India is well within the RBI predictions and which is managed effectively. Hence we would most likely not see runaway of interest rate cycle.

However with Europe showing no sign of recovery till date and with America poised to hike interest rate, certainly global investment scenario is looking gloomy.

Back home, Ex Bankers and Economist are confident about India growth story. They have reason to believe the same. Banking segment is more efficient today to manage even at lesser margin  

Demand for Agriculture, manufacturing and agriculture is strong. Digital India presents tremendous opportunity for growth. Top 500 Corporate hardly need any debt, which bodes well. The BSE Sensex PE at 23.20 gives good opportunity to rebuild your Portfolio. The all time high PE was at 36.210 in Feb 2021. Market saw V shape recovery only because the fundamentals of the economy were strong.

Participation in equity through mutual funds will be the great idea with long term in mind. Systematic Investment Plan as always is the best disciplined way of participation in same.

 

Happy Investing

Financial Markets @ January 2023

 

We saw fall in S&P BSE Sensex by 4.35% month on month basis. Midcaps & Small Caps indices were also down around 4%. Same trend was observed in international market too, lead  by Nasdaq Composite Index falling by 8.6%, Hang Seng 7.98% & Nikkei 225 (Japan) 6.86%.

Global Growth slowdown, especially in US & Europe, is expected in 2023 with rates remaining on higher side. India is in transition phase and relatively better placed with more domestic demand driven and, political stability with a progressive reform agenda.

 According to the National Statistical Office (NSO) data, India’s preliminary GDP growth is expected to grow at 7% in fiscal 2023 from an 8.7% in the previous year. Still very much in a zone to

This New Year could be safely termed in Indian market context as stepping stone year, from long term perspective. We have seen Price Earning valuation adjusting amicably vis - vis earnings, making market more transparent. There is possibility of further adjustments in market valuations with the advance tax season approaching and liquidity might be a slight concern. No major downside risk seen to earnings growth in the near Term as domestic demand is resilient

 Present Interest rates Scenario:

1 Year Benchmark G-Sec prevailing rates @ 7.68. 5 Year Benchmark G-Sec prevailing rates @ 6.79 (yields given in semi-annualized).10 Year Benchmark G-Sec prevailing rates @ 7.26

Yes there is a inflationary pressure on interest rate & Liquidity which can be observed with above yields trend.

Happy Investing

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)

 

Financial markets @ July 2021

 

The Economy Scenario and equity debt markets behavior going forward …

We all will appreciate that economies world over are supporting their respective debt market in these unprecedented times and many including America are printing currencies. Thankfully India is not printing money but has ways out to manage and support economy through wide variety of innovative financing measures available to raise money for projects and also monetization. MOU’s open market operation is one of these.

Most countries like India are also facing inflationary pressure (which is actually due to short supply & not demand push inflation hence unproductive) which is expected to ease going forward. Higher crude prices, is one of the reasons for inflation. However, OPEC has recently announced to increase crude oil production (which they had reduced with the start of pandemic to maintain the oil prices even in the low demand scenario) and reduce the prices by 4$ per barrel. This will certainly ease out some pressure on the Central Bank while having check on interest rates.

Going forward, lower interest rates scenario looks imminent or in other words soft considering the Govt. scope of even stretching itself in terms of fiscal deficit (which is 6.80% as defined in budget) and as rightly being suggested by prominent economist including Mr. K.V. Kamath (veteran Banker). Mr. Kamath is also of the opinion that benign interest rates of 8%  and abundant liquidity were also necessary to seize what he called as a 25 year growth runaway opportunity awaiting the country.

Considering the outcome of above scenario, interest rates will be on lower side and funds will be easily available making private player interested in projects and its executions. On the other side being lesser interest offered on the Bank Fixed deposits and availability of ample liquidity will help in sustaining the equity momentum for at least six to eight months.