April'22 was characterized by extreme volatility, with Nifty oscillating in a range of ~1,300 points before closing 362 points (-2.1%) lower. The increase in volatility was led by weak global cues, with concerns around inflation and potential rate hikes sparking a risk-off globally, leading to elevated FII outflows from India.
Prolonged Russia-Ukraine war further added to the volatility. However, broader market ended on a mixed note with Midcap100 closing 0.6% higher while Smallcap100 ended 1.7% lower. FIIs continued massive selling for the seventh consecutive month, while DIIs counterbalanced them through consistent inflows.
GST collections in Apr'22 stood at a record Rs1,67,540 crore, implying a five-month high growth of 18.5%. This was the 10th consecutive month of more than Rs1 lakh crore GST collection and also the highest since inception.
In an unexpected move, the RBI held an out-of-turn monetary policy meeting on 2-4th May'22 where it decided to hike the policy repo rate by 40bp to 4.4%. The US Fed too announced a 50bps increase in its short-term rate to 0.75- 1.0% on 4th May in an effort to curb inflation.
The changing macro backdrop with heightened worries on rising rate and liquidity tightening is impacting the global markets. Meanwhile, the earnings season continues to remain healthy, notwithstanding the challenges on multiple fronts. Our outlook on corporate earnings and market performance in FY23 is positive. After a strong growth in FY21 & FY22 - we are building in 19% growth for FY23, led by BFSI, O&G, and IT.
A couple of domestic and global factors have led to ~10% correction in Nifty over last one month. The weakness is likely to persist till the concerns over inflation, rising interest rate, and prolonged Russia-Ukraine war subsides. Hence we would recommend investors to stay put in quality companies where earnings visibility is strong. We maintain our positive view on BFSI, IT, Consumer, Metals and Cement while selectively looking at Autos and Energy.