|In our pervious newsletter we had mentioned that after a stellar move in April 2023, a breather in the Indian markets was very much needed. Though Indian markets have been remarkably resilient in the face of global challenges, some volatility has been seen in recent times and we do expect this to continue for some more time. Initial feedback of demand from the ensuing festive and wedding season is quite strong and corporate earnings outlook for Q2FY24 is also positive. However, multi-year high-rate yields in US and sticky inflation with weak global economic outlook presents a complete opposite view. Globally markets were weak following a hawkish commentary by US FED at the Federal Open Market Committee (FOMC) meeting. The FED left the rate unchanged but guided that more hikes would be needed to manage inflation. The rise in crude prices and the Israel issue (post September) are also some additional challenges.|
|Despite global challenges, JPMorgan made an announcement that it would include Indian Government Bonds in its emerging market debt family of indices. This move can lead to estimated inflows to the tune of US$32bn across indices over a period, in addition to additional inflows from active investors. This announcement could also drive expectations of inclusion by other index managers. This move is very positive for India as the expected inflows will likely reduce the upside risk for both India bond yields and currency.|
A strong domestic macro and an equally worrying global scenario has led the markets to a classic dichotomy situation. Indian equity markets were among the handful that stood out and ended September 2023 on a positive note. The recent global events and the ensuing earnings season will drive the market movement in the current month. Momentum should abate a bit and allow opportunities for longer term investors to gradually build their portfolios.