Importance of long-term investing:
In the last 42 years, the rupee has lost 97% of its purchasing power due to inflation whereas the Indian stock market index, Sensex has appreciated by astonishing 40,939% (409 times in 42 years). The only way to create wealth is to invest in assets that returns >= the rate of inflation (considering the risk profile and asset allocation).
From the industry leaders:
India will have a unique place in the global economy: Padma Bhushan Awardee Kumar Mangalam Birla, Chairman, Aditya Birla Group
Never been more optimistic about India: Deepak Parekh, Chairman, HDFC Ltd.
All I will say is: never, ever bet against India: Anand Mahindra, Chairman, Mahindra Group
India and China will account for half of the global economic growth in 2023: International Monetary Fund
Indian macro dataflow moderated but remained strong:
Manufacturing PMI: Manufacturing PMI moderated to 55.4 from 57.8 in December but remained in expansion zone (>50 points) for the 19th straight month;
GST Collection: Collections of Rs. 1.55 Tn in Jan’23 is the second highest GST collection till date;
Credit growth: Credit growth moderated to 14.9% YoY due to higher interest rates;
Inflation: Dec’22 CPI inflation eased to a 11 month low of 5.88% – below the monetary policy committee (MPC) target. However, core inflation is still above 6%.
Trade Deficit: Trade deficit continued to remain elevated at >$25B on continued deceleration in exports and strong domestic demand of imported goods (including higher prices for crude). India’s exports to China fell from $28.1 billion to $17.48 billion in 2022. The trade deficit reached $101.02 billion in 2022, up 45% YoY.
Forex: India’s foreign exchange reserves rose by $3.03 billion to $576.761 billion in the week ending on January 27.
Equities:
Broad benchmark indices were down in the month of Jan- Nifty 50 by 2.4%, Smallcap 100 by 2.4% and Midcap 150 by 2.6%;
FPIs sold INR 41,464 cr. of Indian equities in the month of Jan’23;
Mutual Funds SIP inflows touched record high of INR 13,856 cr. for the month of Jan’23. Net investments in equity through mutual funds surged 70% to INR 12,546 cr.
The Indian equities have witnessed a time correction in the last one year (Increase in corporate profits leading to fall in valuations without any major fall in prices). A few percentage fall may make equities attractive for lumpsum investments.
Fixed income:
RBI MPC hiked rates by 25bps on February 8, 2023;
Similar rate hikes were done by US Feb (0.25%), Bank of England (0.5%) and European central Bank (0.5%);
10 year G-Sec yield is hovering around 7.3%.
Outlook:
From domestic growth perspective, we believe that the RBI is closer to the peak of rate hike cycle. But the rate reversal cycle might not be immediate as it is linked to how other central banks evolve their stance;
While corporate earnings remaining reasonably on track for FY23, the outlook on FY24 remains a function of global growth as well as interest rates;
The challenge lies in the fact that some of the emerging markets, including China are trading a reasonable discount to their own long-term trends and this perhaps makes India less attractive at present to global investors, who are focussed on near-term valuations;
For Indian economy, the big picture clearly is the journey to getting to the third-largest economy status which could see economy nearly doubling in size and this growth is likely to permeate across sectors and market caps (large, mid, small) as companies strive for profitable growth and create wealth for investors. We believe increasing exposure to equities in a disciplined manner with the objective of staying invested for longer-term could support wealth creation for investors.
Disclaimer: The views expressed herein constitute only the opinions/ facts and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. This information is meant for general reading purposes only and is not meant to serve as a professional guide for the readers.
