The month that was: Sep 2023

During the month of September most global equity markets closed in red on the back of rising bond yields in USA and Europe. While rate of inflation is on a downtrend, US Fed maintained hawkish stance raising fears of "higher for longer" interest rate. 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 4.6% during the month of September. Indian equity markets were outliers with Nifty50 Index posting a gain of 2% during the month while Mid-cap and small-cap indices outperformed posting returns of 3.6% and 4.1% respectively. Among the sectors, Electric Utilities (9%), Telecom (8%), Capital Goods (5%) and Diversified Financials (5%) did well. During the month JP Morgan announced that it would include Indian government bonds in its emerging market debt index. India's Aug CPI inflation dropped to 6.8% to 7.4% in July, due to reversal in vegetable prices. July IIP growth was strong at 5.7% vs 3.8% in June. FIIs sold net USD 1.9 bn worth of Indian equities while DIIs bought USD 2.1 bn during the month.

Market Outlook

High interest rate environment in developed countries and geopolitical tension have resulted in volatility in equity markets globally. Uncertain global cues have affected FII flows into Indian markets over last few weeks. However, owing to robust macro fundamentals and expectations of strong corporate earnings trajectory, Indian markets continue to outperform both developed and emerging market peers. Additionally, domestic retail investors have supported the markets via infusion of nearly 15000 crore monthly in form of SIP towards equity mutual funds. Revival of monsoon towards end of the September has raised hopes of a good upcoming Rabi season and improvement in rural consumption. Capex situation continues to be strong as indicated by order inflow for capital goods companies. While near term volatility in equity markets is possible due to global cues, Indian markets are likely to yield robust returns in medium term. We like sectors such as Financials, Consumption, Cement and Capital Goods which should benefit from consumption growth and capex cycle.

Happy Investing!!