5 Aug 2022
Benchmark indices Nifty 50 and Sensex have seen their sharpest gains in nearly a year in July 2022 with gains of 8-9%^. This was aided by prices of commodities cooling off, which has led to hope that inflation could be peaking out.
Global central banks, meanwhile, tried to continue balancing between growth and inflation. The US Federal Reserve hiked interest rates by 75 basis points, and the European Central Bank raised the policy rate by 50 basis points.
Amidst signs of a slowdown in growth in both the US and Europe, “India clearly stands out as an outlier with growth remaining resilient,” said Shibani Kurian, fund manager for equities at Kotak Mahindra Mutual Fund, while discussing the outlook for August.
Corporate earnings, detailed so far, for the first quarter of 2022-23 (Apr-Mar) have shown that earnings are largely in line with estimates.
While there could be challenges to earnings in the near term because of high input costs, commodity costs stabilising is likely to help ease some uncertainties in the second half of FY23.
“Structurally, India appears to be on track to deliver mid-teens earnings growth in the medium term,” Ms. Kurian said.
An improvement in capacity utilisation rates and profitability is also indicative that a new cycle of investments could be on the horizon.
This year will be about selecting stocks with a bottom-up approach, Kurian said. Companies which are market leaders with a strong balance sheet and cash flows at reasonable valuations could be considered, she said.
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^ Source: nseindia.com