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OUTLOOK

GLOBAL ECONOMY

Inflation poses a common challenge to the Global Economy

Bringing inflation down without causing too much collateral damage to economy and labour markets

Monetary Policy to tackle inflation

The direction of monetary policy in advanced economies is increasingly unambiguous now:

? Bringing down inflation

? Avoiding a wage-price spiral

? Preventing the hardening of inflation expectations

PORTFOLIO STRATEGY

? Balanced portfolio strategy to capitalise on the various pockets of strong earnings recovery and outlook

? Drivers of growth cutting across Financials (ROE normalisation), capital goods and real estate

? Recovery in investment cycle led by healthy cash flows in the corporate sector and government’s countercyclical fiscal policy makes us incrementally positive on the industrial/capital goods sector leading us to progressively increase the exposure to this segment.

? Recovery in power demand, capex in generation (renewable + thermal) and transmission implies overweight stance on the associated sectors/stocks.

? In Financials, after a period of margin expansion and lowering credit costs, growth will normalise. Mid/small caps re-rating has been significant in last 6-12 months, future upside likely to be more bottom-up based on execution. Large cap banks still reasonably priced.

? With an increasing number of companies seeking digital solutions, IT spends have gone up structurally. Global uncertainty over next 6 months however has led us to be on the sidelines even though the sector underweight on IT has come down slightly in portfolios.

MARKET PERFORMANCE

BROAD MARKET UPDATE

* The month of October 2023 started on a positive note closer to Highs achieved for the index around 66500 levels.

* However, on account of sharp correction in the US markets taking cues from higher 10-year US yields and the consensus on rates being higher for longer compared to the past expectation, led to some momentum being lost by end of the month.

GLOBAL MARKETS PERFORMANCE

* A selloff in global bond markets led to pressure on global equities. The heightened geopolitical uncertainty also weighed on market sentiment.

* Global stocks declined during the month with MSCI world index declining 3.0% in USD terms and the MSCI Emerging Markets declined by 3.3% for the same period

SECTORAL PERFORMANCE

* All major sectors ended lower in Oct 23. PSU banks declined the most while Realty gained for the month.

* For the year ending Oct 23, PSU Banks (+43%) and Realty (+37%) made the highest gains while Energy (0.42%) was the lowest performer.

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