March ended on a strong note. However, we saw some volatility in April. But the market managed to hold onto crucial support levels. What do you think of the markets, amid uncertainty around the Russian-Ukrainian conflict and the hawkish Fed and RBI?
While equities recovered to pre-war levels with a 4% gain in March 22, commodity prices remained at elevated levels. Commodity prices peaked on March 22 after a slowdown in demand in China.
However, due to a likely further escalation of geopolitical issues and further sanctions by the United States and other countries on Russian products, commodity prices are expected to remain high in the near term.
All major indexes closed higher on March 22, with Nifty Media gaining the most at 18.3%; Metals gained 8.9%, Oil & Gas added 8.2%, while Nifty IT gained 7.3% on the depreciation of the Rupee against the Dollar.
The RBI maintained its accommodative policy, leaving the repo rate unchanged. The central bank acknowledged the upside risks to prices and revised upwards inflation estimates for FY23.
GDP growth estimates for FY23 have been revised down, reflecting global economic uncertainty. 4QFY22 results and management feedback will dictate the trend in the coming weeks.
India’s economy is in good shape given underlying momentum in corporate earnings, clean balance sheets, improving asset quality of banks, levers in place to revive the investment cycle and credit drawdown, as well as the likely resurgence of manufacturing given the PLI and other government reforms.
In the short term, war issues and sanctions on Russian products would have a significant negative impact on global and Indian stocks.
We expect the current problem to subside in the next 1-2 months and REIT flow to return to Indian equities soon, taking the markets to a new high in 2022.
MF’s monthly data was encouraging. We saw Rs 1.6 lakh cr flow into domestic equity funds in FY22 which is a positive sign for the market despite some heavy selling by FIIs. What do you think of the trend? Do you see that as a starting point for household money invested in the markets versus the world?
Domestic mutual funds have absorbed all REIT sales over the past six months. We expect retailer participation to continue in the short term.
We expect the SIP trend to remain strong as most other asset classes are performing well below stocks and equity funds.
The pace of IPOs on D-Street decreased compared to FY22. What is the trend you predict for FY23? Do you pay attention to the big names?
India saw a strong IPO rush in FY22 with 53 companies raising Rs 1.18 trillion, up 3.7x from the previous year. The momentum should also continue in exercise 23.
New era digital players that went public in FY22 included Paytm, Nykaa, Policy Bazaar and Zomato. These companies defied traditional valuation matrices and attracted many investors, especially new retail investors, with histories of lucrative growth despite their lofty valuations.
In fact, these new era digital ventures raised the highest fresh capital during the year with public issues like Paytm raising Rs 18,300 crore and Zomato Rs 9,375 crore. Paytm, in the process, became the biggest IPO of all time, as it surpassed Rs 15,200 crore raised by Coal India in 2010.
The year is also expected to see the largest public issue in Indian primary market history with the Life Insurance Corporation of India aiming to raise around Rs 65,000-70,000 crore through the 5% dilution of government stake.
The company’s 31.60 crore shares are expected to hit the market in May. While 56 companies have obtained Sebi’s approval for IPO, another 41 are in the queue.
Endorsements from these companies will add another Rs 81,000 crore to the fundraising pipeline.
Among the big names, aside from LIC, many other new-era companies are expected to offer IPOs in the coming months. These include Oyo, Ola, Pharmeasy, Delhivery, Byjus, MobiKwik, Snapdeal, Flipkart, Swiggy and Ixigo in FY23.
We have over 10 million retail investors on BSE and the numbers seem to keep growing day by day. Retail investors seem to have come of age and we are seeing a lot of maturities. Could we see the same momentum in FY23? What kind of growth do you see in retail investment?
The market has seen a strong addition of dematerialization and investments from retail investors over the past 2 years. The market absorbed most of the selling by FII with strong participation from retail investors through mutual funds. We expect this trend to continue in FY23 as well.
The market faces inflation risk, as well as rising global interest rates. However, domestic liquidity remains robust.
Have you seen any major trends in retail investors investing in stocks, debt, options or currencies?
In recent times, many retail investors have started trading other options such as futures, options and forex compared to the historic trend of pure cash investments in stocks or money market funds.
More education on new methods and strategies for the future and options has motivated retail investors to participate through various investment instruments.
Earnings season has just begun. Is there a particular sector that investors should watch that could outperform or underperform? What is the trajectory you foresee for FY23?
Q4FY22 was a difficult quarter with the third wave of Covid impacting activity in January and February. March saw some recovery as fewer deaths revived confidence in improving health conditions and thus lowered risk metrics.
The positive impact of reduced health risks and the subsequent opening up of the economy has improved general business conditions, which has manifested itself in the recovery of high-frequency indicators such as transport bills electronics, GST collection and electricity demand.
However, the economic recovery is going through a more difficult path, as the escalation of the geopolitical conflict between Russia and Ukraine during the second half of the quarter created obstacles and led to higher prices for raw materials and oil.
Earnings momentum should continue for the materials and services sectors which are expected to post robust numbers, although some pullback is expected in the consumer sector due to high commodity prices and inflation .
Given increased pressure on commodity costs and supply-side constraints, this quarter is expected to be challenging for commodity consumers such as the automotive, consumer packaged goods, cement and engineering, while the metals, specialty chemicals and materials sectors are expected to outperform.
Do you think high beta stocks could post profits in FY23 as interest rate pressure increases on RBI as well as rising commodity prices?
Profit booking in high-beta and mid-cap stocks is recommended, as mid-caps have continuously outperformed the market over the past few weeks.
The RBI maintained its accommodative policy, leaving the repo rate unchanged. The central bank acknowledged the upside risks to prices and revised upwards inflation estimates for FY23.
GDP growth estimates for FY23 have been revised down, reflecting global economic uncertainty. 4QFY22 results and management feedback will dictate the trend in the coming weeks.
The market around the world continued to follow the development of the Russian-Ukrainian war, which disrupts shipping and air cargo. For domestic markets, trends in global equities, the movement of the rupiah against the dollar, and crude oil prices will dictate short-term trends.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)