Mumbai, Sep 7,2022: Indian macros appear to be relatively stable despite global headwinds. Indias GDP grew by 13.5 per cent in 1QFY23 and the quarterly GDP surpassed the pre-Covid level by 3.3 per cent, according to George Thomas, Associate Fund Manager, Quantum AMC, Quantum Mutual Fund.

Though the GDP growth was below estimates, a revival in domestic demand was visible in strong growth in private consumption (59.9 per cent of GDP) at 9.1 per cent compared to the pre-pandemic level (Q1, FY20). Gross Fixed Capital Formation (34.7 per cent of GDP) recorded a growth of 3.6 per cent in the same period.

Meanwhile, in the domestic market, Sensex advanced by 3.6 per cent on a total return basis in August.

Sensex has outperformed developed market indices like S&P 500 (-4.1 per cent) and Dow Jones Industrial Average Index (-3.7 per cent). It has also outperformed MSCI Emerging Market Index (0.4 per cent).

The rally was broad-based S&P BSE Midcap Index & S&P BSE Small cap Index advanced by 5.8 per cent and 6.1 per cent, respectively.

The report by Thomas said that stable domestic macros and corporate earnings, moderation in commodity prices, and hope of a slowdown in the pace of rate hikes across the globe triggered the rally. But the hawkish commentary by Jerome Powell at the Jackson Hole conference tempered the hopes of slow rate hikes.

Global macro headwinds translating to a potential slowdown in IT spends led to underperformance of the IT sector during the month. Barring BSE IT & BSE Teck, all sectoral indices advanced during the month. Early signs of a potential revival in private CAPEX and a pickup in consumption with the advent of the festive season were reflected in the strong performance of Capital Goods and Consumer Durable indices.

FPIs continued to be net buyers in August at $ 6.4 billion. Domestic institutional investors (Mutual Funds & Insurance put together) turned sellers to the tune of $825 million in August. FPIs cumulatively recorded a net outflow of $ 21.4 billion since January this year. In the same timeframe, DIIs recorded a net inflow of $31 billion.

Credit Growth continues to strengthen:

Pick up in credit growth despite the rising interest rates depict the strength of the ongoing economic recovery. As per the RBI release, Non-Food Credit grew by a healthy 15.1 per cent on a yearly basis, retail loans grew at a robust 18.8 per cent supported by growth across secured and unsecured segments. Growth in industry loans gained pace to 10.5 per cent. (Data as of July 2022).

Though part of the loan growth is inflation-led, steady improvement in capacity utilisation of the manufacturing sector to 75.3 per cent in Q4FY22 (Source: RBI Survey) augurs well for CAPEX led corporate loan demand.