The Month that was : March 2023

During the month of March most global markets ended positive except the likes of UK, Brazil and Malaysia. S&P 500 Index registered a gain of 3.5% in spite of the problem in US regional banks as Central Bank stepped in quite fast to provide liquidity to the banking system. Equity markets in China ended flattish having done relatively well last month on the back of reopening of economy and Government focus on prioritizing growth. Indian markets also ended flat as as concerns over Adani group subsided after investment by a leading global fund. Nifty50 Index showed a gain of 0.3% in March while mid-cap and small-cap indices were down 0.4% and 1.4% respectively. Power, Oil and Gas and FMCG outperformed where as Auto, IT and real estate underperformed. US Fed raised interest rates by another 25 bps in March to 4.75%-5%, the highest level since September 2007. India's CPI inflation in February moderated marginally to 6.44% (January: 6.52%), led mainly by a sequential fall in food prices. WPI inflation in February moderated to 3.9% from 4.7% in January. FIIs bought net USD 250mn worth of Indian equities, while DIIs bought USD 3.8bn during the month.

Market Outlook 

While global growth prospects for 2023 were improving at the beginning of the year, banking crisis in US and Europe in March has muted the growth estimates again. However, India continues to have a robust growth outlook for FY24 with estimate of nearly 6% growth which is likely to be the best among major economies. Valuation premium of Indian market vs other emerging markets has come down to reasonable levels. After correction in our market due to adverse research report on Adani Group, things seem to have settled down with investment in Adani group companies by GQG Partners. Possibility of El-Nino impacting monsoon this year adversely remain the key risk for Indian markets as rural economy has not yet recovered to pre COVID levels. Also, any global risk off situation due to spread of banking crisis in USA could induce volatility in the markets. 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!!