In focus with Tushar Pradhan - June 2022

In focus with Tushar Pradhan - June 2022

• Markets continue to remain expensive as compared to historical averages, though the valuation premium has moderated after the recent correction. Hardening bond yields are negative for equity valuations. Market returns may lag earnings growth over the next few quarters, on account of moderation in valuation multiples. We continue to run high conviction strategies, with a cyclical tilt to be well positioned for the earnings growth and macro recovery cycle holding a medium to long term view.
  Indian equity markets had another weak month of performance and underperformed key global equity markets. Continued FII outflows, inflation concerns and further spike in global crude oil prices, impacted market sentiments adversely
• Despite all the headwinds and disruptive factors, the 4QFY22 earnings season signed-off a decent quarter, with Nifty companies delivering an in-line performance compared to expectation. The adjusted aggregate Nifty revenues / EBITDA / PAT were up 23 per cent / 16 per cent / 21 per cent YoY, which were broadly in-line with expectation. As a result, earnings expectations for FY23 / 24 remained broadly unchanged post results
• The Central government announced several measures to curb inflationary pressures such as cutting excise duty on petrol & diesel, levy of export duties on steel products and reducing import duties on coal and naphtha, being the key proposals
• Given this backdrop and also elevated bond supply, fixed income markets are likely to trade with a negative bias over the near term. The short to medium part of the curve has already reacted sharply with yields inching upwards significantly, given expectations of front loading of rate hikes by RBI and hence could over the medium term, present some opportunities given attractive carry and roll-down