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Below is Quote On Weekly Market Outlook 07 October 2022 Says Shibani Sircar Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company

Indian equity markets were remained volatile during the week. Despite the volatility, India continues to outperform MSCI emerging market and MSCI world indices. Growth in India has been resilient even as developed economies grapple with slowing growth and higher inflation.

The US Federal Reserve remained hawkish and raised rates by 75bps. The monetary policy tightening stance of the US Fed resulted in the further appreciation of the DXY against other currencies. The 10Yr 2Yr US yield curve was inverted for 3rd straight month in anticipation of a possible recession. In India, RBI hiked the policy repo rate by 50bp to 5.90%, largely in line with consensus expectations, continuing to frontload tightening to counter inflation risks. Going ahead it is likely that RBI’s rate decision would be guided by domestic considerations whereby average CPI inflation is expected to moderate in FY24. Higher than expected tightening by the US Fed and geopolitical uncertainties remain the key risks.

On the domestic front, high frequency indicators point towards improvement in activity and the early trends of  festive demand appears strong. As we enter the Q2FY23 earnings season, the focus would be on corporate commentary on demand and margins.

Going ahead, there are multiple global macro factors at play and higher interest rates and inflation are likely to be sticky in the developed world. Indian growth outlook appears stable and a relative outlier. However, given the outperformance of the Indian markets and with relative valuations appearing stretched, it is possible that markets see some volatility in the near term. In the medium term, the outlook for equity markets remains healthy, given the strenghth of domestic macro growth and corporate earnings trajectory.

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