Macro and
Equity Market
Outlook
Equity Market
Outlook
GLOBAL MACRO &
MARKETS – June 2023
India’s NIFTY index surged to an all-time high at the end of June,
with a growth of 3.5% m/m, as major global indices also ended the
month on positive note. The S&P500 (+6.5), the Nikkei (+7.5%), the
Euro 50 (+4.3%), and the MSCI World (+5.9%) were all gainers in
June. Among emerging markets indices, the MSCI EM, the HANG
SENG, BOVESPA Brazil, and the MOEX Russia, all recorded positive
growths in June, of +3.2%, +3.7, +9.0% and +2.9% respectively. LME
Metals Index witnessed a growth of +1.5%, owing to a weaker dollar
and improved factory activity coming from China, which is the
largest consumer of major metals.
WTI and Brent Crude rebounded in June, by +3.7% and +3.1%
respectively, even as uncertainty around the OPEC+ (Organization
of the Petroleum Exporting Countries plus) supply cuts, the Fed’s
hawkish stance, and China’s sluggish recovery remained on the
mind of market participants. The Dollar index weakened by -1.4%
over the month, with the Dollar depreciating by -0.8% vis-à-vis the
Rupee. India 10Y G-Sec ticked upwards by 13 bps, while the USA’s 10Y
G-Sec yields rose by 19 bps, and the German Bund rose by 11 bps,
with rates settling at 7.12%, 3.84% and 2.39% respectively.
Domestic Macro & Markets - June 2023
SENSEX (+3.3%) rose in June, in tandem with other Indian indices.
BSE Mid-cap and small-cap indices outperformed large-cap
indices and were up 6.2% and 6.8%, respectively. Sector-wise, all
sectors ended in green, with Capital goods (+9.4%) and Healthcare
(9.0%) witnessing the largest rises. Rallies in Indian indices were
driven by FII flows, as FIIs continued to be net buyers of Indian
equities in June (+$5.3 Bn, following +$4.95Bn in May). DIIs reversed
their net selling of May by turning net buyers of Indian equities
(+$0.5 Bn). Mutual funds were net buyers in June with inflows of $1.2
Bn while Insurance funds were net sellers in the month with
outflows of -$654 Mn.
India's high frequency data update:
Sustained high levels of GST collections, declining retail and wholesale
inflation, resilient core sector outputs and elevated credit growth
bode well for the Indian economy.
Manufacturing PMI:
Manufacturing PMI in June’23 came in at 57.8, down from May’s
31-month high of 58.7, and remained in expansion zone (>50) for the
24th straight month, buoyed by new export orders and new order
growth at a 26- month high. Input cost inflation was at its lowest in
three years.
GST Collection:
Collections of INR 1.61 Tn (+12% YoY) in June’23 concluded the
sixteenth consecutive month of collections over the INR 1.4 Tn mark,
following record collections of INR 1.87 Tn in April’23. This is the fourth
time GST collections crossed the INR 1.6 Tn mark since the inception
of the system 6 years ago. The MoM and YoY rise in collections was
owed to rises in domestic transactions (Including import of
services) (+18% growth YoY). Rising compliance, boosted economic
activity and improved consumer sentiment are key drivers of
sustained GST collections.
Core sector production:
Core sector production growth accelerated to 4.3% in May 2023,
against a 3.5% growth in April 2023, owing to an expansion in five of
the eight component sectors. Production of Coal, Fertilizers, Steel,
Refinery products and Cement rose by 7.2%, 9.7%, 9.2%, 2.8% and
15.5% YoY respectively. Natural Gas, Crude Oil and Electricity
declined by -0.3%, -1.9%, -0.3% YoY respectively.
Industrial Production:
Factory output as measured by the IIP index surged MoM by 4.2%
YoY in April 2023 vs a tepid 5 month low of growth of 1.1% YoY in
March 2023. Mining output rose +5.1% while electricity generation
declined by -1.1% YoY in April 2023.
Credit growth:
Credit growth reached 15.42% YoY as of 16th June 2023 against YoY
growth of 13.17% as observed on 17th June 2022.
Inflation:
May 2023 CPI inflation rate eased to a 25-month low of 4.25% from
4.76% in March 2023, led by the base effect on moderating food
and energy prices. WPI inflation continued to drop for the twelfth
straight month, with the May 2023 print at a seven and a half year
low of -3.48%, 256 bps down from April 2023’s at -0.92%, as a
favourable base effect came into play.
Trade Deficit:
Indian Merchandise Exports recorded a decline of -10.3% YoY to
$34.98 Bn in May 2023, while Imports growth declined, albeit slower,
by -6.6%% YoY to $51.10 Bn. India’s trade deficit widened to a
5-month high of $22.1 Bn. Engineering goods and Petroleum
product exports saw a degrowth of -4.2% and -29.9% YoY.
Monthly Performance for Key Indices:
Note: Market scenarios are not the reliable indicators for current or future
performance. The same should not be construed as
investment advice or as any research report/research recommendation.
Past performance may or may not be sustained in future.
Source: Bloomberg
Past performance may or may not be sustained in future.
Source: Bloomberg
Market View
Higher interest rates have weighed on the global growth prospect.
US growth is expected to moderate even further going forward.
Anticipated recovery in China post the re-opening also seems to
have slowed down. While the inflation may have peaked out
globally, but with the elevated levels markets may look for clarity on
Central Banks’ stance on the direction of interest rates.
Domestic macro trends have been very resilient despite global
uncertainty. Capex has been holding up well, government led
manufacturing push has remained robust and there are signs of
increasing participation by the private sector. We are witnessing
early signs of recovery in rural demand as well as private sector
capex revival. These are the areas which may provide support to
domestic growth. While demand conditions remain patchy, there
has been some improvement from last 6-month lows. Moderating
inflationary trend is a key positive. India’s tax collections to GDP,
credit to GDP and most importantly rising corporate earnings to
GDP reflect transparency and formalisation reforms undertaken in
the pre-pandemic period.
Q4FY23 results were largely in line with the expectations with some
recovery in margins and profitability while volume growth has been
modest.
We believe volatility may continue to remain elevated in the short
term till global uncertainty abates.
We continue to focus on domestic demand related sectors as
growth and earnings certainties may be higher in related segments.
We suggest investors should have a long-term orientation for
equity investments and should consider products based on their
investment goals and risk appetite. Investors can look to invest in a
staggered manner to ride the near-term uncertainties.
Conservative investors may consider asset allocation strategies.
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
Past performance may or may not be sustained in future
Chart of the month :
India’s NIFTY ended June 2023 very strong, reaching an
unprecedented high of 19,200. FII (Foreign Institutional Investors)
flows drove the rally in recent weeks, as all major Indian indices
rallied during the month.
Common Source:
NIMF Research, Bloomberg LP
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