Factsheet Index
Macro and
Equity Market
Outlook
Global Macro & Markets
Global Markets rebounded in October with US S&P500 hitting its all-time high as more than 80% of the companies reporting results surprised the street positively on the quarterly earnings. MSCI World gained 5.6% MoM on the back of S&P500 (+6.9%) and Euro50 (+5%). MSCI EM lagged the rally at 0.9% gains as Brazil was down 6.7% while NIFTY50 India and MOEX Russia remained muted at 0.3% and 1.1% gains respectively. Brent Crude crossed the $80/bbl mark to gain 7.5% over the month. LME Metals index also gained 5.6% MoM despite some weakness in the latter half of the month.
Domestic Macro & Markets
SENSEX hit new all-time highs in middle of the month but ended almost flat amid concerns over steep valuations, rising commodity prices and mixed earnings. BSE MidCap index (+0.1%) and BSE SmallCap index (-0.4%) ended almost in-line with SENSEX (0.3%). Among sector indices, Discretionary (+6%), Financials (+3%) and Energy (0%) outperformed the index while Staples (-5.8%), HealthCare (-4.1%) and IT (-2.5%) lost the most. Market breadth declined in September with 81% of BSE 100 stocks remained above their respective 200-day moving averages. FPIs sold US$2.2bn of Indian equities while DIIs bought US$0.6bn.
India's high frequency data update:
With current account in surplus, GST collections at all time highs, manufacturing activity expanding rapidly and inflation moderating, macro data has been quite encouraging over the month.
Manufacturing PMI:
Manufacturing PMI rose to an 8-month high of 55.9 in October compared to 53.7 in September. New orders continued to expand in October amidst low inventory levels.
GST Collection:
Collections in October 2021 clocked second highest collections of over INR 1.3 Tn (+24% YoY) as compared to INR 1.17 Tn in September.
Power consumption:
Power consumption in the month of October was 6.6% higher than October-20 and 19.5% higher than the consumption in October-2019.
Core sector production:
Core sector production rose 4.4% in September as against a YoY rise of 11.5% in August and rise of 0.6% in September last year.
Industrial Production:
Manufacturing IIP rose 9.7% YoY in August vs a fall of 7.6% in August of last year.
Credit growth:
Credit growth remained sluggish at 6.5% YoY as of 8-October against YoY growth of 5.7% as observed on 9-October 2020. Aggregate deposit growth picked up to 10.5% YoY.
Inflation:
CPI inflation in September fell sharply to 4.35% yoy amid favourable base and softening food prices. WPI inflation came at 10.7% yoy in September moderating from 11.4% in August.
Trade Deficit:
September trade deficit increased sharply to US$22.9 bn as compared to US$13.9 bn in August. Non-oil exports increased 18.7% to US$28.5 bn over September 2020 while non-oil imports increased 57.8% YoY to US$39 bn.
Current Account Balance:
The current account registered a surplus in 1QFY22, rising to $6.5 bn (0.9% of GDP) against a deficit of US$8.2 bn in 4QFY21 (-1% of GDP) and surplus of US$19.1 bn (3.7% of GDP) in 1QFY21. The surplus was led by moderation in trade deficit to US$30.7 bn (4QFY21: US$41.7 bn) and an increase in net services receipts to US$25.8 bn (US$23.5 bn in 4QFY21).
GatiShakti initiative
The Union cabinet approved the INR 100 Cr PM GatiShakti National Master Plan for multi-modal connectivity to develop infrastructure and reduce the logistics cost to boost the economy.
Reappointment of the RBI Governor
The Government has reappointed Mr Shaktikanta Das as Reserve Bank of India’s Governor for 3 more years. As the RBI starts to unwind its loose monetary policy, stability in its top leadership has been critical and reappointment of Das is being considered as a welcome development.
Market View
Indian equity market sentiment has remained resilient despite the record high valuations supported by higher liquidity, strong earnings possibility, relatively lower rates. The improving domestic macro data suggests that a reasonable economic recovery is underway. Capex revival, business normalization, improving global trade and domestic consumption are key contributors to this anticipated recovery.
Higher inflation may pose a potential challenge for prevailing easy liquidity & lower rates and any faster than expected normalization in the same may impact market sentiment. Geo-political developments and oil prices are other key areas to be tracked.
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.
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 :
Central Govt tax collections have been very strong in 1HFY22. Within that, partly aided by favourable base, corporate tax collections grew massive 105% YoY in the 1H. This amounts to 56% of the budgeted target.
Common Source:
CMIE, Nippon India Mutual Fund Research, Bloomberg
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