Market Outlook – December 2022

“Never invest at unreasonable valuations. Never run for companies which are in limelight.” – Rakesh Jhunjhunwala – Indian Businessman, Ace Investor & Stock Trader

After a fall in September, Indian markets had a strong comeback in October. November has been a month of consolidation. Markets continue to be focused on Indian fundamentals, as the domestic money is the key driver and is now less influenced by the global happenings.

Positives in November:

  • China saw relaxations in Covid restrictions. 
  • In the US, lower than expected inflation number has raised hopes of a policy pivot.
  • European gas prices have fallen as they seem to be well provided for winters. Logistic costs have come down as well.
  • Oil prices has fallen below USD90 for brent. A USD10 fall in oil prices is a USD12/13 billion saved for our country.
  • Q2 result season has ended. The season was stronger than expected on profits. Q3 results would have the benefit of a strong festive season sales and a relatively weaker base.

India foreign exchange reserves rose $2.89 bn to $550.14 bn for the week ended November 25. The Reserve Bank announces the launch of the first pilot for retail digital Rupee (e₹-R) on December 01, 2022. The pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time. Different features and applications of the e₹-R token and architecture will be tested in future pilots, based on the learnings from this pilot. India has become the first country to launch its own digital currency.

November Outlook: we expect markets to continue its positive run, but with a limited upside (Nifty Target levels – 19.5k on the upside and 17.5k on the downside). If US CPI nos. print a higher no., markets gain may reverse as Fed will continue with 75 bps rate hike.

Though Nifty & Sensex touched record highs, it was not a broad-based rally, with limited participation by mid-cap and small-cap stocks. Only five stocks including Reliance, TCS, HDFC Bank, Infosys & HDFC Ltd. accounted for over 50 percent of the increase in the Nifty 50’s market capitalisation, over the past two months.

Analysts have started increasing targets for the Sensex and the Nifty, even though economic growth estimates have been lowered by the foreign and the local brokerage houses, the International Monetary Fund, the Reserve Bank of India and the rating companies including S&P Global, Moody’s and Fitch. Investors now await RBI’s bi-monthly policy on December 5-7 for further cues. Monthly auto numbers, PMI and inflation numbers will also be watched.

Key Economic Events to watch a) 7th Dec: RBI Policy decision; b) 13th Dec: US CPI; c) 14th Dec: US Fed fund rates decision

Happy Investing!

Mushtaq Kazi
Mushtaq is the co-founder of Mushtaq has had corporate stints with Kotak Securities & IIFL group. He holds an MBA degree from Pune University.
His interests include cooking & gardening. When he is not cooking or gardening, he is writing.