In focus with Tushar Pradhan - July 2022

In focus with Tushar Pradhan - July 2022

Nifty index has corrected about 14.5 per cent from its highs (seen in mid-Oct 2021). Post this correction phase, the valuations have turned more reasonable as earnings growth has remained largely intact. On a 10-year basis, Nifty is still slightly above historic average valuations, while on a 5-year basis it is now trading below averages.

Equity Market Update

• It was another weak month for equity markets both in India and globally.
• Recession fears in the US and rising interest rates contributed to the weak equity market sentiments
• As a result, the FII outflows from Indian equities continued unabated during June as well
• S&P BSE Sensex & NSE Nifty indices were down 4.5 per cent / 4.7 per cent respectively, while the broader markets continued to underperform as BSE Midcap / BSE Smallcap indices shed 6 per cent / 5.9 per cent respectively
• In terms of sectoral performance, Auto was the only notable gainer while Metals followed by Consumer Durables were the worst performers during the month

Fixed Income update

• The key event at the beginning of the month was the RBI policy in June
• RBI monetary policy committee (MPC) raised repo rate by 50 bps to 4.90 per cent which was largely expected by the markets in the run up to the policy
• May CPI came in at 7.05 per cent, marginally lower than expectations. Both core inflation and food inflation declined, albeit the base effect was favorable
• IIP growth was robust, though aided by base effects. In terms of high frequency data, services PMI remained strong while manufacturing PMI marginally weakened