Monthly Outlook December 2022

As much as COVID-19 and its various outcomes were the talks of global financial markets in 2020 and 2021, 2022 has been dominated by news of inflation – and how it impacts economic growth worldwide.

In India, retail inflation fell to its lowest level in 11 months to 5.9% in November, down from 6.8% in October. This is the first time in 2022 that inflation has come in below the Reserve Bank of India’s upper margin of 6%. *

It is, though, below the inflation in the US for several months now, as indicated in the chart below.

 

 

“While our inflation continues to remain elevated, it has remained well below American inflation for more than 13 months in a row, which is a feat that India has achieved for the first time in its independent history,” said Nilesh Shah, group president and managing director of Kotak Mahindra Mutual Fund.

In an effort to tackle this inflation, the US Federal Reserve has been raising interest rates in all of 2022.

It had, in fact, raised rates by a total of 375 bps to November 2022. The US central bank also raised rates by 50 bps in its meeting last week.

While higher interest rates in the US raise concerns about capital outflow, the trend in India, especially in the last five-six months, has indicated that equity markets continued to gain, as illustrated in the chart below.

 

 

It will be interesting to see how equity markets in India move from here on. For more insights, watch our monthly outlook video.

 

 

 

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*Source: indianexpress.com

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