“Investing is a journey of self-discovery. It reveals your relationship with money, your tolerance for risk, and your ability to stay disciplined in the face of uncertainty.” – Jeremiah Say
Indian equities rebounded sharply in April, on the back of strong domestic macros, healthy corporate earnings, and consistent intuitional buying (FII & DII) & mainly due to RBI’s surprising decision to pause at the April meeting amidst a gloomy outlook that prevailed in March.
For April’23, Nifty bounced 4.1% to close above 18k after 4 months of weak performance. Broader market witnessed higher action with Nifty Midcap 100 gaining +5.9% while the Nifty Small Cap 100 rose +7.3%, outperforming the Nifty.
Positives in
April:
- India’s
manufacturing PMI at a 4-month high. - GST
collection zoomed 12% to a record high of Rs1.87 lakh crore. - Q4
Corporate earnings is in line so far with a Profits of 26 Nifty companies, that
had declared results till 4th May’23, have risen by 10% YoY (v/our est. +7%). - RBI
pausing rate hikes, the impact of rate hike might be seen on earnings for next
1-2 quarters. - Sharp
fall in Crude Oil Prices. - WPI
Inflation eases to 29-month low 0f 1.34%.
Global
Markets: Global cues were
mixed. While both US Fed and ECB raised interest rates by 25bps with a likely
pause ahead, slower economic growth expectation, led to sharp fall in crude oil
prices. That apart banking crisis continues in US adding to the concerns.
Washington is also staring down a June 1 deadline to raise the debt limit to
allow continued borrowing to cover already accrued bills or risk the nation’s
first modern-day default, which would rock the U.S. economy and send out global
shock waves as well.
Threats
ahead: Even after raising
interest rates to multi-year highs and at one of the fastest paces, most
countries are struggling to bring inflation back within their target bands.
This is in the context of nearly six months of disinflationary trends from peak
inflation rates and of consistent rate hikes globally.
Slow pace of
inflation fall will lead to higher for longer policy rates policy, which will
create recessionary scenario in Developed countries. Though chances of
recession in India is nil, but recession in developed markets will slow down
growth in India as well.
Market Outlook
– May: The recent bounce
in markets is capped on the higher side. Earnings have improved but not that
high which will lead to new highs for indexes. We expect Nifty to be in the
range of 17800-18500 for this month.
A considerable
fall in inflation in US and a clear pause from US Fed will trigger next rally.
Though monsoons are predicted to be normal this year, but any negative surprise
will also have a big impact on Indian markets.
