Factsheet Index
Macro and
Equity Market
Outlook
Global Macro & Markets
Global Markets ended the month on a weak note amid concerns over the new coronavirus strain. MSCI World dropped 2.3% MoM led by 4.4% and 3.7% fall in Euro50 and NIKKEI respectively. 7.5% decline in Hang Seng and 6.3% in MOEX Russia dragged MSCI EM down by 4.1% over the month. Brent Crude oil prices retracted over 16.4% in November as the omicron variant renewed demand concerns globally. LME Metals index also gained 5.6% MoM. LME Metals index dropped marginally by 1.5% over the month. US 10Y yields declined 11 bps while the US Dollar index gained 2% owing to heightened volatility during last week of the month.
Domestic Macro & Markets
SENSEX and NIFTY fell around 4% each, their biggest monthly loss since March 2020. BSE MidCap index (-2.3%) and BSE SmallCap index (-0.2%) outperformed the narrow index. Among sector indices, Power (+3.6%), IT (+2.7%) and HealthCare (+1.9%) outperformed the index while Metals (-9%), Banks (-8.7%) and Auto (-5.3%) lost the most. Market breadth declined in November with 64% of BSE 200 stocks trading above their respective 200-day moving averages. FPIs sold US$3.8 bn of Indian equities in the secondary market while DIIs bought US$4.1bn.
India's high frequency data update:
With real GDP now above pre-COVID levels, GST collections at all time highs, manufacturing activity expanding rapidly and inflation settling at moderate levels, macro data has been quite encouraging over the month.
Manufacturing PMI:
Manufacturing PMI rose to a 10-month high of 57.6 in October compared to 55.9 in October. An easing of COVID restrictions drove demand and boosted sales, indicating the economy was on a path to normalization.
GST Collection:
Collections in November clocked second highest collections of over INR 1.32 Tn (+25% YoY) as compared to INR 1.3 Tn in October.
Power consumption:
Power consumption in the month of November was 5.7% higher than November-20 and 2.2% higher than the consumption in November-2019.
Core sector production:
Core sector production rose 7.5% YoY in October as against a YoY rise of 4.5% in September and decline of 0.5% in October last year.
Industrial Production:
Manufacturing IIP rose 2.7% YoY in October vs a rise of 4.5% in October last year.
Credit growth:
Credit growth inched up to 7.1% YoY as of 5-Nov against YoY growth of 5.8% as observed on 6-Nov 2020. Aggregate deposit growth picked up to 11.4% YoY.
Inflation:
CPI inflation in October increased by 13 bps to 4.48% from 4.35% on the back of higher food prices even as core inflation remained sticky and elevated. WPI inflation came at 12.5% as fuel and power inflation rose sharply to 37.2% with basic metals rising at 28.9%.
Trade Deficit:
October trade deficit narrowed to US$19.9 bn as compared to US$22.6 bn in September. Exports increased 42.5% YoY to US$30.3 bn while imports increased by 62.5% YoY to $55.4 bn.
GDP Growth:
Real GDP grew 8.4% in 2QFY22 and was 0.3% above pre-COVID GDP level. Real Gross Value Added (GVA) grew 8.5% with the industrial sector growth at 6.9% and services sector growth at 10.2%. Private consumption (PFCE) and investments (PFCF) are up 8.6% and 8.7% YoY.
Vaccinations
By the last week of November, India had administered over 1.22bn vaccine doses wherein ~55% of the population received the first dose while ~32% of the population was fully vaccinated.
Monsoon
Late withdrawal of monsoon ensured that the rains were “normal” in 2021 with a deviation of ~1% from its long period average. Rabi acreage at 34.61mn hectares was up 7.3% over the year ago period.
Market View
Concerns on emergence of a new variant has led to higher volatility across the globe. Also, some indicators suggest that global growth may be slower. However, we believe that if the impact of new virus strain is controlled Indian recovery is likely to be in line with expectations supported by strong earnings growth, capex revival etc.
We believe all three market cap segments (Large, Mid and Small) offer similar risk reward, making a case for diversified strategies with investments across market caps. Conservative investors seeking equity exposure with lower volatility may consider asset allocation strategies like Multi Asset/Balanced Advantage etc which diversify risk across different asset classes and/or manage equity allocations dynamically.
Note: The sectors mentioned are not a recommendation to buy/sell in the said sectors. The schemes may or may not have future position in the said sectors. For complete details on Holdings & Sectors of NIMF schemes, please visit website mf.nipponindiaim.com;
Past performance may or may not be sustained in future
Chart of the month :
October Infrastructure index indicates continued recovery, standing 7% above pre-covid levels – led majorly by cement, fertilizers and electricity.
Common Source:
CMIE, Nippon India Mutual Fund Research, Bloomberg
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