Market Overview – June 2021
Global equities continued to rise as vaccination accelerated across developed economies.
Global economy and markets
- Global equities continued to rise as vaccination accelerated across developed economies.
- Developed governments eased mobility curbs, global trade rebounded in a V-shape and US consumer spending exceeded pre-COVID levels.
- Key risks: a resurgence in cases and an earlier-than-expected US Fed hike on rising inflation.
Indian economy
- The RBI noted that the tapering of the second wave and aggressive vaccination have brightened near-term growth prospects.
- The RBI estimated Q1 FY22 GDP growth at 22.7%.
Indian stock markets
- The benchmark index hit lifetime highs, crossing 16,000 in the first week of August.
- The rally was driven by strong inflows, a good earnings season, vaccine progress and steadily falling cases.
- July’s reopening and pent-up demand point to a strong Q2 FY22, with the RBI accommodative despite inflation.
Corporate performance
- Q1 FY22 revenue and profit grew strongly YoY on a low base, but margins faced input-cost pressure.
- Across 2,328 companies, sales fell 8.4% and net profit 10.7% QoQ, ending four quarters of sequential gains.
- IT, cement and building materials, metals, domestic pharma, fertilizers, textiles, FMCG and oil & gas outperformed; auto, banks & NBFCs, chemicals and capital goods lagged.
Outlook
- The Nifty P/E is 27x, down from a historic high of 42x around February 2021, largely due to strong earnings growth.
- Penny stocks have outperformed fundamentally strong companies, with retail investors holding almost 70% of free float and promoters selling over ₹20,000 crore.
- We are booking profits in expensive stocks and adding new names in two to three tranches on corrections, with a three-to-five-year horizon.
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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