Headwinds Ahead! Stay on Course

The month of March has started on a very good note for the Indian equity market. After three months of continuous negative returns, we have seen positive return in the first five trading days of this month. The main reason is the recently released GDP data for the third quarter of FY23 which shows that the Indian economy grew by 4.4 per cent against the expectation of 4.6 per cent by many economists. One of the reasons for such a low number is the upward revision of the previous year’s GDP data. Had it not been revised, some economists estimate that the Indian economy would have grown at a rate greater than 8 per cent for FY23.[EasyDNNnews:PaidContentStart]

This along with the US boutique investment firm GQG Partners investing in beleaguered shares of four Adani Group companies worth USD 1.87 billion added some stability in the market. Also, the three months of consecutive fall in the Indian equity market has helped to settle the frothy valuation of the equity market. The Nifty 50 is currently trading at a 12-month forward PE ratio of 17.7 times, below its long-term average of 19.9 times. What will also help the Indian equity market to gain is the discount at which most of the Nifty constituents are trading compared to their historic averages in terms of valuation.

All this will help the Indian equity market to catch up with the global equity market. India and Brazil are the only two markets that have generated negative return year-till-date among other major global markets. Nevertheless, there are certain headwinds that I foresee which may impact its recovery – one of them being the El Nino. Our cover story explains how the advent of El Nino may impact the markets and how it can keep inflation levels high. Do take note of the observations in the cover story as they will help you prepare for the market volatility expected in the coming months.

With the domestic consumption story intact, the retail sector is one of the biggest beneficiaries. Our special story highlights the growth triggers in place for the sector and how one can benefit from this trend. In our sectoral report we have covered the metal and mining industry which will help you get a bird’s eye view on the developments taking place in this sector. It is very difficult to say if the recent up move is merely a technical bounce or a major reversal trend. A positive trend is being seen across the global markets with VIX falling sharply.

The broader market participation is also very heartening with several Small-Cap stocks making fresh 52-week highs. It is still a stock-picker’s market. Do note that it takes only a few trading sessions to change the sentiments both at the stocks level and at the market level. The sentiments have improved, yet we are not out of the woods yet with headwinds clearly visible. As an investor, continue to invest in a slow staggered manner in the broader markets. We will of course keep you posted about the changes as and how they take place.
 

RAJESH V PADODE
Managing Director & Editor

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