Market Overview – March 2022
After two years of loose monetary policy lifted markets, they fell sharply on inflation, geopolitics and supply-chain strain.
Global economy and markets
- After two years of loose monetary policy lifted markets, they fell sharply on inflation, geopolitics and supply-chain strain.
- US inflation reached 8.4% in May 2022, prompting monetary tightening.
- Oil neared US$120 a barrel on geopolitical tension, with no easing in the Russia–Ukraine conflict.
- COVID lockdowns in China worsened supply-chain issues.
Indian stock markets
- Indian markets have corrected since early 2022 amid FII selling, now in its eighth consecutive month.
- An unscheduled RBI rate hike weighed on sentiment over inflation.
- Indian markets fell 7–8% from their highs, while other major markets corrected more than 10%.
- Mid- and small-caps fell more than 25% from highs; overvalued growth stocks corrected more than value stocks.
Indian economy
- GDP grew 4.1% in Q4 FY22 despite the third COVID wave and high inflation weighing on consumption.
- Full-year GDP growth was 8.7%, though only 1.5% above pre-pandemic 2019-20 levels.
- Inflation hit 7.8% in April 2022, an eight-year high, while crude near US$120 clouded FY23 prospects.
- A normal monsoon, record crop prices and government measures may partly cushion growth.
Corporate performance (Q4 FY22)
- Nifty revenue grew 23% YoY, but EBITDA growth of 16% lagged on rising costs.
- BFSI, Oil & Gas, Metals, Chemicals, Textiles and Auto performed better; IT, Pharma, FMCG, Cement and consumer companies lagged.
- The full input-cost impact is expected in H1 FY23; the Nifty trades near 19x FY23 EPS, about its 10-year average.
- Portfolio companies, except cement and pharma, posted double-digit bottom-line growth, though mid- and small-caps corrected 10–25%.
Outlook
- Rising rates, high inflation and supply disruption make active stock selection more important.
- Markets are expected to remain choppy over the next two quarters amid earnings pressure.
- Investors should remain patient and use the opportunities volatility creates.
- “A 10% decline in the market is fairly common.” · Christopher Davis
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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