Expert Analysis of the Global Macro Events & News affecting the Indian Markets
Weekly Synopsys
| Index | 1 week | 1 month | 1 year | 5 years |
| Nifty 50 | 0.49% | -0.46% | 7.72% | 71.04% |
| BSE Midcap | -0.82% | -1.54% | 3.84% | 48.69% |
| S&P 500 | -0.98% | 1.49% | -7.53% | 47.44% |
| Nasdaq | -0.27% | 5.33% | -14.80% | 59.28% |
Earnings So Far
Earnings season has been weak in the US and moderate for India Inc. From the table, it is evident that India remains well positioned as recessionary clouds continue to eclipse.
| Index | Revenue Growth | Operating Profit Growth |
| S&P500 | 4.6% | -4.9% |
| BSE 500 | 18.7% | -0.2% |
2: Based on 382/500 companies in the index that have reported results
Adani Debacle
- $120 billion has been wiped off on a group level since the short sell report.
- Rumors regarding cancellation of capex plans and appointment of independent auditor continues to influence sentiments.
- There is pressure on SEBI to thoroughly investigate and report conclusions.
Major Events & their Effect on Markets
| Event | How does it matter? | Our Expectations |
| FOMC Minutes | As interest rates increase, the cost of borrowing money becomes more expensive. This makes buying certain goods and services, such as homes and cars, more costly. This in turn causes consumers to spend less, which reduces the demand. If the demand for goods and services decreases, businesses cut back on production, laying off workers, which increases unemployment. Overall, an increase in interest rates slows down the economy and curbs inflation | Fed will continue to oblige by its path of frontloading interest rates irrespective of early recessionary indications in some areas of the economy |
| Building Permits | Building Permits measures the change in the number of new building permits issued by the government. Building permits are a key indicator in projecting future housing starts | Falling permits will pronounce a falling housing market and construction slowdown. This has a direct impact on pigment, dye, and plywood manufacturers in India |
| RBI Meeting Minutes | Same as FOMC Minutes | Inflation surpassed the upper band this week. RBI will point towards a interest rate hike in its next meeting |
Macro Factors & their Effect on Markets
| Indicators | Data | Impression |
| India GDP Growth | 6.8% expected | Fastest among major economies! |
| PMI Manufacturing | 55.4 (three month low) | Bullish |
| Export of Goods | 6.6% degrowth year-on-year ($33 billion in January) | Bearish |
| Inflation | 6.5% (above the band) | Bearish |
News that caught our attention
- Lithium reserve discovery in Jammu and Kashmir supports the self-reliance story. We currently import 80% of our lithium requirement. This isn’t the first discovery India is making. It’s firmly believed that 75% of the discovered and undiscovered lithium reserves lies in the Chile, Argentina and Bolivia. This discovery seems to draw a contradiction, which is good news.
- IT stocks have been in focus this week, with the market sentiment being mixed. Markets are reacting to selective economic data and the fact that most of the interest rate hikes have been priced into the markets. Fundamentally, the major players continue to close on major deals, build their pipeline and the attrition rate is trending downwards. Challenges like growth slowdown in their major markets are now visible and management is hinting at this. Even though we do not foresee a major out performance in the IT space until later this year, most of the correction has taken place.
- India’s retail inflation has crossed the RBI’s upper tolerance band of 6%. Spike in food prices accelerated the CPI inflation to a three-month high. In order to counter rising prices, the Union government on Wednesday sold 385,000 tonnes of wheat worth ₹901 crore in the open market, in the second round of a planned auction.
Overall Green Portfolio smallcases Outlook
The broader market (small and mid-caps) have been under-performing since the last 18 months, thanks to rising input costs and interest expense.
Many manufacturing firms with strong fundamentals faced the burnt of inflation which was reflected in thinning margins, and once inflation started to ease, they are faced with a global slowdown in demand – especially from their export markets – US and EU. To top it all, they were facing inefficiencies as their recent capex (factories) were being slowly ramped up. Markets have heavily and steadily discounted many such names despite them having strong guidance, world-class management and solid overall fundamentals. This is the undervaluation we are exploiting.
Our valuations are extremely comfortable with the Price-to-earnings of the overall portfolio at 12x compared to the Small and Mid-cap index of 24x. We do not own any PSU’s or companies with corporate governance red flags.
Explore Green Portfolio’s smallcases
Green Portfolio is a SEBI Registered (SEBI Registration No. INH100008513) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. This report does not represent an investment advice or a recommendation or a solicitation to buy any securities.
You may want to read
India’s Consumer Boom Unveiled
Top Highlights of FY24 from Niveshaay smallcase
What’s the hype about Value and Momentum?
