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Global Economy and Stock Markets

The first half of 2022 was historically dismal for global stock markets and there is still some way to go before the storm blows over. Facing a multi-decade high in inflation, aggressive monetary policy tightening by the Federal Reserve and the effects of the Russia-Ukraine war, the US markets were down more than 20% as of June 2022. However, better than expected earnings season and cool-off in commodity prices, resulted in a sharp 10% upmove in July 2022.

Further, the recent lockdowns in China have resulted in economic activity slowing significantly but with reopening as well as monetary and fiscal easing with government announcing a slew of measures, economic growth should slowly pick up pace.

At the beginning of the year, it was unclear how far inflation would surge and how aggressively would central banks respond. However, all these issues are well understood by the markets now. This along with sharp fall in stock markets globally provide some reassurance that markets have accounted for the bad news so far and could recover (as can be seen from the recent upmove) if inflation and growth turn out better than feared earlier.

Indian Economy

Notwithstanding the impact of 3^rd wave of COVID and high inflation impacting private consumption, we expect India to remain the fastest growing economy in the world (even as major economies brace for slowdown/recession) and grow at 7.5% in FY23.