All posts tagged: marketoutlook

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 – December 2021

Global Stock Markets

The global economy enters 2022 in a weaker position than previously expected. As the new Omicron COVID-19 variant spreads, countries have reimposed mobility restrictions. Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated. Further, the ongoing retrenchment of China’s real estate sector and slower-than-expected recovery of private consumption should result in growth moderation from 5.9% in 2021 to 4.4% in 2022.

Additionally, there are several risks that are at the forefront of investors minds which has resulted in sharp correction over the last few months 1) Global bond yields have hardened on inflation concerns; 2) Oil prices have risen sharply on growing geopolitical tensions; 3) Escalation in Russia-Ukraine conflict; 4) Domestic inflation is proving sticky and may have upside risks and 5) Expensive valuations across sectors and stocks.

Indian Economy

Notwithstanding a highly transmissible third wave driven by the Omicron variant of COVID-19, Indian economy is expected to grow at 9.2% for 2021-22 (highest amongst all large economies), slightly above the GDP level of 2019-20. Additionally, the growth-oriented focus of government, continuity in policy/strategic direction of economy and stability in taxation were the key positives of Budget-2022.

Vishal ShahMarket Overview – December 2021
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Market Overview – September 2021

Global Stock Markets

Global equity markets continued to generate positive returns for the quarter as economies opened up and activity levels picked up. Stocks have been on a roll as another mostly successful earnings season has unfolded, but there are reasons for investors to be both optimistic and cautious.

There are several risks that are at the forefront of investors minds, including concerns over the new COVID variant & rising covid cases in Europe, inflation, central bank tapering and sharper than expected slowdown in China. But low interest rates and solid corporate earnings provide a strong foundation of support for equities.

Indian Economy

Economic activity in India is improving gradually as chances of 3rd wave are receding. Indian economy is doing better as compared to Europe and US where 3rd wave has been severe. COVID-19 cases are trending down on the back of successful vaccination programme as vaccine supplies improve.

Vishal ShahMarket Overview – September 2021
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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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