All posts tagged: fundmanagerupdate

Market Overview – September 2022

Global Economy and Stock Markets

The U.S. economy and stock market continued to struggle in the quarter gone by. Economic uncertainty may have peaked in 1st half of 2022 but it still remains high. US stock markets continue to feel the weight of Federal Reserve policy tightening, shrinking market liquidity and slower economic growth and were down by ~25% as of Sept 2022, their worst performance since 2002.

The world’s 2nd largest economy is facing a series of headwinds including protracted COVID curbs, global recession risks impacting exports and a property downturn. The effects are yet to be seen as the government tries to revive economy and give support to the struggling property sector.

Inflation, which is the center point of concern has started to decline with October data showing lowest inflation figures since Jan 2022. This has resulted in hopes of Fed reducing its aggressive tightening policy as early as Dec when the odds for a 0.5% rate hike have increased significantly.

Indian Economy

As per Reuters, growth seems to have likely slowed to 6% in 3rd quarter vs 13.5% in 2nd quarter. However, India still continues to be the fastest growing economy in the world.

Vishal ShahMarket Overview – September 2022
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Market Overview – June 2022

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 3rd 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.

Vishal ShahMarket Overview – June 2022
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Market Overview – March 2022

Global Stock Markets

Over the last 2 years, markets have been kind to investors globally mainly led by loose monetary policy. With worries cropping up on multiple fronts, there has been a reset in investors sentiments and liquidity. Some of the reasons for sharp fall in the last couple of months are as follows:-

1) Very high inflation leading to monetary tightening (US reported inflation of 8.4% in May 2022); 2) Oil prices have risen sharply on growing geopolitical tensions (~$120 per barrel); 3) No easing in Russia-Ukraine conflict; 4) COVID related lockdown in China worsening supply chain issues.

Indian Stock Markets

The Indian stock markets following the global cues have been in correction phase since start of 2022 on the back of continuous FII selling (continued for 8th consecutive month). Also, a bit of surprise of rate hike by RBI well before the next scheduled MPC meeting also impacted the market sentiment over concern of high inflation. However, we seem to have fared far better with 7-8% drawdown from highs vs all other major markets correcting more than 10%.

However, the same is not true for a lot of mid and small-caps companies which have fallen significantly (more than 25%) from highs. Another

Vishal ShahMarket Overview – March 2022
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Market Overview – June 2021

Global Stock Markets

Global equity markets continued to generate positive returns for the quarter as vaccination pace accelerated in most developed economies. Additionally, governments of most developed countries continued to ease COVID related mobility restrictions and activity levels picked up. This has resulted in global trade volumes showing a V-shaped bounce back and stimulus measures resulting in improved purchasing power for consumers with consumer spending already exceeding pre-COVID levels in USA.

The key risk to global growth recovery could emanate from potential re-acceleration in COVID cases leading to disruptions in coming quarters. Also, US Federal Reserve indicated that interest rate hikes could be sooner than expected due to rising inflation.

Indian Economy

RBI in its latest reports stated that “The tapering of 2nd COVID wave along with aggressive vaccination push have brightened the near-term growth prospects for the Indian economy and GDP growth for Q1’22 was estimated at 22.7%”.

Indian Stock Markets

India stock markets marched to new lifetime highs with the benchmark (NIFTY 50) crossing 16,000 mark in 1st week of August. The rally was driven by strong positive inflows, good earnings season and positive developments on the vaccine front alongwith steady decline in cases which boosted confidence in economic recovery.

Vishal ShahMarket Overview – June 2021
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