Market Overview – December 2022
An IMF survey suggests inflation peaked in 2022, consumer spending remains robust and the energy crisis was milder than feared.
Global economy and markets
- An IMF survey suggests inflation peaked in 2022, consumer spending remains robust and the energy crisis was milder than feared.
- Global growth is projected to slow from 3.4% in 2022 to 2.9% in 2023, up from an earlier 2.7% projection.
- Risks remain tilted to the downside; the road to full recovery has only just begun.
- Many key US and European indices returned 7–15% since the start of 2023.
Indian economy
- Urban consumption, led by discretionary spending on travel and tourism, supports activity.
- Bank credit grew 16.7% up to January 2023, and capacity utilisation was about 75%.
- A normal monsoon and better crop prices should improve rural demand in 2023-24.
- The budget prioritised infrastructure spending and fiscal-deficit control while private capex picks up.
Indian stock markets
- Indian markets were the weakest globally in January 2023, affected by the Adani matter and budget uncertainty.
- The Sensex gained 6.3% since October, while mid-caps returned –1.5% and small-caps –2.4%.
- Recession fears, rising rates and sticky inflation also weighed on sentiment.
Corporate performance (Q3 FY23)
- Nifty revenue grew 17% YoY, EBITDA 11% with slightly lower margins, and PAT 5%.
- Mid-Cap 100 revenue, EBITDA and PAT grew 11%, 9% and –3% respectively.
- An average season: banks, autos, capital goods and infrastructure led, while metals, IT and FMCG struggled.
- Management expects strong domestic demand, exports bottoming out and margin recovery from the next quarter.
Outlook
- We believe the worst is behind us, supported by a near-peak rate cycle, an earnings pickup, rural recovery and government spending.
- Portfolio companies’ average revenue grew 11% in Q3 FY23 while PAT fell 8%; TTM PAT was flat YoY.
- Portfolio stocks are about 30% below 52-week highs, at an average 14x TTM EPS versus 21x a year earlier.
- The risk-reward is highly favourable, with meaningful upside once macro conditions stabilise.
Disclaimer. This overview reflects the views of the Care PMS investment team at the time of publication and is for information only. Investments in equities are subject to market risk. Past performance is not indicative of future returns. Please read the disclosure document carefully before investing.
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