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The banking system credit growth rate indicates a healthy credit demand

India equities trading at a premium vs other markets both developed and EMs

Premiums of Indian equities may moderate

Indian equities in a consolidation phase

As per a report by Emkay Wealth Management titled ‘Navigator’, Indian equities have traded lower in the last month mainly due to external factors, especially the US interest rate policy. The Indian equity market is in a consolidation phase currently. However, investors should use this opportunity to invest in quality BFSI, Tech, and Manufacturing. Given the current banking system growth rate - the credit demand is likely to be healthy.  The Indian equity market is expensive when compared to other markets both developed and emerging markets. However, the premium at which the market is trading may moderate but it will not get eliminated.

Indian equities trading at a premium

The domestic market is expensive compared to other markets both developed and emerging markets. However, the premium at which the market is trading may moderate but it will not get eliminated given the prospects for growth and expansion. Any corrective downward movements are opportunities to buy into the markets in the long run. As we move into the second half of the year the recessionary conditions may moderate and growth could reappear in the major economies.

Earnings still resilient

The quarterly results have brought with them quite interesting numbers with clear resilience displayed by businesses that are based on stable models. The sales growth continues to be resilient but the pressures of input costs are still visible on the operating margins. Even as the commodity prices have stabilized or marginally corrected, the inability to pass on the cost pressures has led to compression in margins. Secondly, the rise in interest rates may affect the PAT margins as well as going ahead. The banking system's credit growth rate indicates a healthy credit demand.

A mild recessionary condition in the US

The persistence of inflation and the continued reliance on hard money have sowed the seeds of economic sluggishness which seems to have set in already. However, it may be a mild recessionary condition and not a grave one in the view of many experts including the forecast given by Former Federal Reserve Chairman Alan Greenspan.

Growth has been in the low single digits in China but with the re-opening of the Chinese economy, the turnaround in the Chinese economy is probably around the corner.

The growth rate in India should be understood against this background. For the next financial year, the GDP growth is expected to be in the range of 6.00% to 6.50%, and this rate of growth is comparatively higher when we look at it in a broader context. The overall demand scenario is also likely to be good with the urban demand in a robust form and rural demand may be sluggish owing to the high price level encountered in the last one and a half years. The PLI Scheme and its positive impact on the overall manufacturing sector should be overlooked. In addition to that the intended agricultural credit expansion to the tune of Rs. 20 lakh crore and the crowding in the effect of Rs. 10 lakh crore of capex provided in the budget will aid business and industry and spur manufacturing activity.

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