The month that was : July 2023

During the month of July global markets continued their positive trend with most major markets ending in green. The gains were supported by lower inflation in several developed markets, including the US. US Fed increased rates by 25bps in its meeting in July which could possibly be the final hike in this cycle giving comfort to the market participants. S&P500 index posted a gain of 3% while Russia and Hong Kong were the leading markets with 7.4% and 6.1% gains respectively during the month. Nifty50 Index posted a gain of 2.9% in July with Mid-cap and small-cap indices outperformed posting returns of 5.5% and 8% respectively. Among the sectors, Utilities (10%), Oil and Gas (9%) and Pharma (9%) were top performers. IMF raised India's FY2024 GDP forecast by 20 bps to 6.1%. India's June CPI inflation went up to 4.81% from 4.31% in May, due to rising food prices. May IIP growth was 5.2% vs 4.5 % in April. FIIs bought net USD 3.3 bn worth of Indian equities with continued positive stance towards India while DIIs sold USD 325 mn during the month. 

Market Outlook 

As the rate hike cycle in USA seems to have peaked, the near term outlook for global markets and especially for emerging markets remains positive. 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 as rural economy is expected to pick up during second half of the year amidst festive season. With monsoon rainfall near normal so far, fear of any large impact of El Nino has receded. We remain 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!!