The Indian economy ought to perform well in the long term compared to the world economy and other Asian economies. When compared to the world economy, India had better growth in almost every financial aspect whereas other countries are still trying to recover from the Covid hit.

Let’s see what areas are keeping India ahead of other countries in the financial game-

• The current inflation rate of India is at 7% whereas the USA is running an inflation rate of 8.3%. Even though India’s inflation rates have gone higher than what it was a year ago, it still remains low compared to the major countries.
• The Indian economy expanded 13.5% year-on-year in the second quarter of 2022 and gross value added increased faster for agriculture, forestry & fishing in the same period.
• Gross National Product in India rose upto to 14536732 INR Tens Of Million in 2021 from 13280223 INR Tens Of Million in 2020.

Now, what pointers should one look out for, for the rest of 2022 for the Indian stock market? Here’s what we think –

• Observe the Inflation Trajectory for the next 2 months – Going ahead the markets are to be closely watched as global markets are planning rate hikes. RBI is yet to announce a 50 bps rate hike going ahead. Markets are factoring such sentiments with outflow taking place. In the last month, there has been a net buying by FII in the Cash segment worth Rs 22025 Crore although.
• Inflation Trajectory for the next 2 months, keep a close eye on CPI (Consumer Price Index) – CPI inflation eased to 7.0% (year-on-year) during May-June 2022 from 7.8% in April, although it persists above the upper tolerance band. Food inflation has registered some moderation, especially with the easing of edible oil prices and deepening deflation in pulses and eggs. Spillovers from geopolitical shocks are imparting considerable volatility to the inflation trajectory. The appreciation of the US dollar can feed into imported inflation pressures going ahead.

• RBI Policy for the next 2 quarters, how they balance rate hike, growth– On the outlook for growth, rural consumption is expected to benefit from the improving agricultural prospects. The demand for contact-intensive services and the improvement in business and consumer sentiment should maintain discretionary spending and urban consumption. Investment activity is expected to get support from the government’s capex push, improving bank credit and pushing capacity utilization. Upcoming festive season will further promote growth while RBI is expected to balance the inflation with rate hikes.
• Q2 earnings starting from 2 weeks of October – There is perception of weak performance as there had been inflation concerns going around which has added to cost pressures. Rainfall has been uncertain this time in different parts of countries which can add on to extra pressure in case of agro based companies. Earning improvement is seen in the upcoming quarters considering festive demand.
• Global markets behavior as we have been the outperforming markets in the whole world – Indian markets have recently outperformed global markets in terms of investment. Investors claimed India to be one of prime investment destinations with several government incentives in place. Domestic benchmark indices such as BSE Sensex and Nifty50 have been outperforming the global peers across all the major markets in Europe, Asia, South America and the US in the different frames of time. In the last one year, Indian indices have leaped over more than a percent against only a 5% rise in FTSE 100 (Financial Times Stock Exchange). All the global indices have plunged in the last one month, incorporating the Indian indices, but the fall has been less than a per cent for D-Street benchmarks, contrast to the global peers which are down up to 9%.

In the short term, the Indian market looks weak. Nifty can correct at current levels. Any closing below Rs.17,166 and is going down. Further selling is imminent and can trigger further selling to Rs.15,750. In the long term, the market looks bullish. We can expect some periods of volatility in the upcoming months due to the overall hike in interest rates globally. Investors can watch out for sector-specific or stock-specific actions over these months.

SOURCES – 

• Ministry of Statistics and Programme Implementation (MOSPI)
• rbi.org.in

DISCLAIMER – This is for educational purposes only. We do not suggest investing moves nor are we responsible for any profits and losses.