December 2018 India Market Overview
Equity markets staged a smart recovery
Equity markets staged a recovery on the back of multiple factors such as sharp correction in global crude oil prices, recovery in INR and easing concerns regarding the NBFC liquidity scenario. Global crude oil prices continued on a southward journey and fell about 22 per cent during the month below USD 60 per barrel level. The crude oil prices have corrected about 28.5 per cent since the beginning of October 2018 and are now down 11.5 per cent on a YTD basis. The INR also showed reversal trends appreciating by about 5.8 per cent versus the USD during November and closed below Rs. 70 / USD level. As of November end, INR has retraced some of its losses since the beginning of the year and has now showing a depreciation of about 9 per cent on a YTD basis.
The market indices BSE Sensex and NSE CNX Nifty as a result gained 5.1 per cent and 4.6 per cent respectively to recoup some of the losses from the previous 2 months. The broader market performance also held up well though they trailed the market indices. BSE Midcap and Smallcap indices were up 3.0 per cent and 1.7 per cent respectively during month. In terms of the BSE sectoral indices, Metals were the worst performing sector (due to softening global commodity prices) followed by Healthcare and Information Technology. All the other sectoral indices showed gains during the month (barring Oil & Gas which remained flat for the month).
The quarterly earnings season ended on a satisfactory note with Nifty universe aggregate revenues / adjusted EBITDA / adjusted PAT registering a growth of 26 per cent / 12 per cent / 15 per cent respectively^. The aggregate revenue growth traction was pretty strong and came above expectations while profitability performance (EBITDA & PAT) was broadly in-line as margin pressures on the back of higher commodity prices negated the strong revenue growth momentum.
India's GDP for the quarter ended September 2018 (2QFY18) moderated to 7.1 per cent YoY from 8.2 per cent YoY registered for 1QFY19 and came below expectation of 7.5 per cent growth. The sequential moderation in GDP growth was expected due to an unfavourable base effect from the previous year but the impact was slightly worse than anticipated as agriculture and other private sector activity moderated even as government spending remained strong. However, other macro indicators released during the month continued to paint a stable to an improving picture of the economy. Bank credit growth accelerated to 14.6 per cent YoY for October 2018, highest growth registered since March 2014. CPI inflation continued to remain benign and moderated to 3.3 per cent YoY for October which is well below the RBI's target range. IIP growth moderated a bit but remained stable at 4.5 per cent YoY for September.