Market Update – June 2023

Indian equity markets continued their positive momentum in May following a good April. Improving domestic macros, better than expected Q4FY23 earnings, US debt ceiling extension and strong FII inflows into Indian equities; led to an improvement in sentiments. In May 23, benchmark NIFTY50 was up 2.6% while broader markets represented by S&P BSE Midcap and S&P BSE 250 SmallCap did better rising 6.3% and 5.4% respectively. Flows into Indian equities picked up pace – FIIs buying USD ~5.3 bn worth of Indian equities, highest monthly buying since August 2022. FIIs have now been net buyers for three consecutive months. DIIs were marginally negative to the tune of USD ~0.4 bn.

Market Outlook
We continue to maintain our stance of a good second half 2023 for global economies. Inflation is surely trending down and should surprise positively from here on. We also believe that the global interest rate increase cycle is more or less done, and it is possible that towards the last quarter of 2023, we might in fact start to hear of an interest rate cut. Global risk on is also visible as confidence among investors improves. From an India perspective, economic indicators are coming in quite positive. Corporate performance has been good and the outlook also appears decent. The move globally from asset allocators to move away from China to other markets like India is also being felt, with a net inflow of almost USD 5 bn from foreign investors into Indian equities in the month of May. There is though a forecast of El-Nino impacting Indian monsoons and that is the key monitorable in the near term.

We continue to maintain our recent view of being positive on Indian equities and any global event led correction should be used as an opportunity to add Indian equities. Discretion though is advised as the broader markets have been seeing huge momentum. Fundamentals over momentum is what we would advise

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