6 Jun 2022
The month of May has been tough for equities.
Concerns that economic growth across the globe is seeing a slowdown, combined with persistently high inflation resulted in a sell-off in this asset class, and Indian equities were not spared either.
Volatility persisted through the month, with the benchmark Nifty 50 losing over 8% at one point during the month, before finally closing 3% lower. This follows losses of a little over 2% in April as well.
The start of 2022-23 (Apr-Mar) clearly seems to be turbulent, but what does June look like?
The recently concluded corporate earnings for the March quarter have shown some pressure on the profitability of companies because of elevated input costs, and this could impact earnings over the near term as well, said Harish Krishnan, Sr. Fund Manager for equities at Kotak Mahindra Mutual Fund.
“…in that sense after a strong rally that Indian equities saw from Apr 2020 to Oct 2021, it appears that markets are digesting those gains,” he said while discussing the outlook for June.
Investors should look through this phase of volatility, and instead focus on the structural reforms that have been undertaken, and the likely improving prospects for corporate India, Mr. Krishnan said.
The narrative amid corporate India has changed from before COVID-19 the pandemic. Companies that were earlier looking to sell assets, and are now looking at investments over the next few years because of an improvement in cash flows, he said.
This improved outlook for investments, along with the tailwind of savings in the country coming into the financial system may provide a strong runway for equities over the medium term, he said.
Source: NSE India