The Month That was : August 2023

During the month of August global markets showed a reversal from July month with most major markets ending in red. The decline was caused by worries over renewed weakness in the Chinese real estate sector and US Fed's stance of continued tight monetary policy. Minutes from July’s US Fed meeting suggested that most members are in favour of a 25 basis rate hike, while a few reckon that there should be no more hike. S&P500 index posted a loss of 1.6% during month of August. Hong Kong markets declined by 8.5% while China posted a loss of 5.2%. Nifty50 Index posted a loss of 2.5% during the month on the back of 15-month high CPI Inflation and a weak monsoon. Mid-cap and small-cap indices outperformed posting positive returns of 3.7% and 4.6% respectively. Among the sectors, IT Services (2%), Transportation (2%) and Retail (3%) did well. India's July CPI inflation went up to 7.4% from 4.8% in June, due to rising food prices. June IIP growth was 3.7% vs 5.3 % in May. FIIs bought net USD 1.2 bn worth of Indian equities while DIIs sold USD 3 bn during the month.

Market Outlook

While inflation trajectory is moving down in most of the developed markets, concerns over growth has emanated due to high interest rate environment. Additionally, economic recovery in China has been slower than expected. Amidst this, India has witnessed constant inflow from FIIs over last few months dominated by ETF Flows on improving macro fundamentals. India continues to have a robust growth outlook for FY24 with estimate of nearly 6.5% by RBI which is likely to be the best among major economies. Domestic demand scenario looks robust as seen from high frequency data points like growth in personal loan, credit card spending, automobile sales and passenger data for aviation sector etc. Consumption is likely to get a further boost amidst festive season spending. Below normal monsoon and its impact on rural economy remains a key concern in near term. We stay positive on Indian equities over medium term owing to structural levers of Indian economy and like sectors such as Financials, Consumption, Cement and Capital Goods which should benefit from consumption growth and capex recovery.

Happy Investing!!