When I think back to discussions from 2008, India was expected to decouple from #DevelopedMarkets and possibly not be significantly damaged by the #crisis in Western economies. Despite this, because of trade integration and capital flows, economies continue to follow the patterns of the world #economy .
While India may still be #coupled with global #market and economic #cycles, the following considerations are worthwhile:
- Despite the runaway #inflation, India’s Inflation is at 8 year high Vs developed world at 40 year high. Impact on household balance sheets are much lesser Vs Developed countries. EMI rise is in the range of ~30-40% in the developed world vs the rise of ~15-20% in India. India wage rise is much higher than in the developed world thereby cushioning such an impact.
- INR #depreciation has been much lesser than many countries. On a YTD basis INR depreciated only by ~7% vs Japanese yen by ~15%, Euro by ~11% and British pound by ~10%
- Fall in the Indian market from highs seen in october 2021, far lesser than developed markets. #nifty is down by ~8% from its yearly high Vs #nasdaq down by ~23%, #spx500 down by ~14%, #EuroStoxx down by 16% from its yearly high.
Are we moving toward decoupling? We may not decouple, but we are undoubtedly #outperforming developed economies, and this trend is anticipated to continue in the years to come given that India is expected to be the #fastestgrowing major #economy in the world.
Week gone by
- #Fed raised rates by 75 bps on expected lines with commentary of slower raise depending on the upcoming data
- US #recession narrative softened with expectations of a milder recession than earlier expectations given healthy employment situation
- #NIFTY continued to gain by ~2.6% in the week taking monthly returns to a healthy 8.7%. Global exposure sectors like #Metals and #IT outperformed during the week given the RISK ON rally. #FIIflows were positive in the month of July after witnessing outflows for the prior nine months.
- Corporate results and commentary so far is satisfactory. Revenue growth being better than expectations while margins were lower than expectations, many sectors shall see an #improvement in the margins through the course of the year.
What to look for ?
- The prognosis for inflation and the #RBI rate decision. Rates are anticipated to rise by 35 to 50 basis points, but the prognosis for inflation and whether it has peaked will be considerably more crucial.
- Even though market volatility has significantly decreased, we might experience some moderation in August considering that indices have risen by 14% from their June lows.
Markets have now digested the expectations related to #inflation, liquidity #tightening or #easing and #recession, markets over the next twelve months are likely to start rewarding companies which have stayed on their course during and post Covid. Companies that have focused on value addition to their customers, gained market share, strengthened their supplier network, invested in expansion/technology/talent and retained/strengthened their talent pool are likely to get rewarded and create value for the new upcycle that we are likely to experience.
We continue to be positive on our identified themes of #techification, #financialisation #Consumerism #Globalisation #Formalisation and #CleanEnergy
Stay healthy! Stay Invested!
Logon to https://tikonacapital.smallcase.com/ to know more
Sumit Poddar
Chief Investment Officer & Smallcase Portfolio Manager
Tikona Capital
コメント