6th April 2022
Year gone by
Nifty reordered an impressive 19% YoY gain despite challenges on multiple fronts. The story of Nifty returns was story of two halves with H1FY22 doing the heavy lifting with 21% returns while H2FY22 yielded -2%. DII continued to be the knight in shining armor for our markets with highest ever inflows of USD 26.8 Bn vs outflows of USD 18.4 Bn in FY21.The FIIs after being consistent buyers for the last five years turned into sellers with outflows of USD 17.1 Bn. The Nifty Midcap 100 (+25% YoY) and Nifty Small cap 100 (+29% YoY) outperformed in comparison to its larger peers but its performance was also front ended in H1FY22.
GDP
India's current account balance stood at 2.7% of GDP in 3QFY22, higher than 1.3% of GDP in 2QFY22. It implies a CAD of USD26.5b in 9MFY22 v/s a surplus of USD32.1b in 9MFY21. Wider CAD was because of a larger merchandise trade deficit, which stood at 7.2% of GDP after a deficit of 5.9% of GDP in 2QFY22.
Geo-Politics
Russia and Ukraine continue to remain embroiled in war as well as peace talks, but without much progress. Sanctions on Russia are proving to be more disadvantageous to the rest of the world in the form of elevated commodity prices. Most commodity from Oil, Gas, Coal, Steel and even agricultural commodities like wheat, barley have shot up in the past few months because of supply side shocks versus demand side pull.
Sectoral Performers
Top gainers in the sectoral space were Utilities (+63%), Metals (+62%), Media (+54%), Oil & Gas (+42%), Telecom (+42%), and Technology (+40%). While Private Banks, Consumer, Autos, and Healthcare underperformed. The breadth was positive in FY22, with 37 Nifty constituents closing higher.
Global Markets
Among the key global markets Brazil (+6%), Russia MICEX (+6%), Japan (+5%), India (+4%), the US (+4%), Indonesia (+3%), Korea (+2%), and the UK (+1%) closed higher in local currency terms. However, China (-6%), and MSCI EM (-3%) ended lower. Over the last 12 months, MSCI India (+21%) has outperformed MSCI EM (-13%).
View
After a fantastic CY21, we were hoping for a great CY22 for India, most things seemed to be falling in place staring with the end of the pandemic, soft commodity prices, strong recovery post covid and rural demand pickup. In the last 2 years India has taken great strides in manufacturing across categories like electronics, garments, vaccines as India strives to become the world’s factory. With a clear majority of the Incumbent Government, it gives them firepower to further push indigenization and exports to faster the economic growth engine. The narrative of the India story remains strong which is also visible through resilient flows from retail investors into the markets through mutual funds. The upcoming IPO of LIC is something to keenly watch out for, it is likely to excite FII’s as much. But as we step into new fiscal, we believe, the next two quarters are likely to see a sharp margin impact and corporate commentaries can worsen in the wake of inflationary input pressures. The broader market is clearly bearing the brunt of commodity cost inflation, whose trailer we saw in 3QFY22 corporate earnings season. That said, if the input cost situations do not improve and price increases become inevitable, we are not too far away from some demand dislocation.
IPO Juggernaut
An IPO is like a negotiated transaction- the seller chooses when to come public- and its unlikely to be a time that’s favorable to you. – Warren Buffett
Looks like everyone loves IPO
Over last 2 years IPO’s have captured a lot of attention with everyone playing for the trading pop or listing gains. 1,60,000 Cr Rupees were raised through IPO’s in last 2 years i.e between 2020-2022, which was equal to the amount of money raised between 2010-2020.
Markets have become volatile in past few months, but investors have blamed management, bankers, social media influencers and every other person apart from themselves for their greed.
