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* Market witnesses elevated volatility, closes in the red: The Nifty ended 3% lower MoM at 16,585 in May’22 – the second consecutive month of a decline. However, Nifty has remained resilient in CY22YTD despite multiple headwinds.

* India among the laggards in May’22: Russia (-7%), India (-3%), and Indonesia (-1%) ended lower in local currency terms though China (+5%), Brazil (+3%), Japan (+2%), Motilal Oswal values your support in the Asiamoney Brokers Poll 2022 for India Research, Sales, Corporate Access and Trading team. We request your ballot. Taiwan (+1%), and the UK (+1%) closed higher. Over the last 12 months, MSCI India (+7%) has outperformed MSCI EM (-22%). In P/E terms, MSCI India is trading at an 87% premium to MSCI EM, above its historical average of 61%.

* FII outflows v/s DII inflows: FIIs recorded the eighth consecutive month of outflows at USD4.9b. However, the outflows were more than offset by material DII inflows. In May’22, DIIs posted the highest inflows since Mar’20 at USD6.1b.

* Corporate earnings remained strong in 4QFY22, however was concentrated: MOFSL Universe earnings grew notably at 21% YoY, which came on a high base of 99% growth in 4QFY21. However, growth was hardly broad-based and led only by three sectors (BFSI/O&G/ Metals).

* Auto and Consumer only gainers, global cyclicals the top losers: In the sectoral space, Autos (+5%), and Consumer (+1%) closed higher, while Metals (-16%), Utilities (-11%), Oil & Gas (-10%), Real Estate (-7%) were the biggest losers.

* Prefer largecaps over midcaps: We find more value in large-caps than mid-caps given the relative valuation equation. That said, we reiterate earnings delivery is crucial for markets to hold, in an adverse milieu of volatile and challenging macro.

* Top ideas:

Largecaps: Reliance Industries, Infosys, ICICI Bank, SBI, Bharti Airtel, Titan Company, Ultratech Cement, M&M, Hindalco, Godrej Consumer, and Apollo Hospitals.

Midcaps/Smallcaps: Chola. Inv & Fin., Macrotech Developers, Ashok Leyland, L&T Technology, Jubilant Foodworks, APL Apollo Tubes, GR Infraproject, Angel One, Sapphire Foods, VRL Logistics, and Lemon Tree Hotel.

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