JANUARY 2022
Positive 
Negative 
Neutral 
| PARAMETERS, EVENTS | IMPACT | REASON |
| Inflation (CPI - India) | |
It was 5.59% in Dec '21 V/s 4.91% in Nov '21. Inflation is still within RBI's target band of 2%-6% |
| Brent Crude | |
Brent crude prices appreciated by 15% In Jan '22 |
| Currency INR USD | |
INR depreciated by 0.1% in Jan '22 |
| GDP | |
GDP grew 8.5% in Q2FY22 |
| FII Inflows | |
FIIs were Net-Sellers of Indian equities to the tune of ₹33,303 Cr |
| DII Inflows | |
DIIs poured ₹21,928 Cr into Indian equities in Dec '21 |
| G-Sec Yield | |
Yield moved from 6.45% to 6.68% in Jan '22 end |
| Tax Collection | |
Record high GST collection @ ₹1.38 Lakh Cr in Jan '22 |
| Global - Inflation | |
In USA, inflation is 7% in Jan '22 and it is the highest reading in past 40 years |
| EQUITY MARKETS | IMPACT | REASON |
| Q2 FY22 Earnings Session | |
Most companies earnings are higher than estimates |
| Valuations-PE | |
It is almost 10% off from historical peak |
| Valuations-PB | |
It is historical peak levels |
| Valuations-Market cap to GDP Ratio | |
Current marketcap to GDP ratio is @ 116% and it is at a historical high |
High Risk 
Moderate Risk 
| RISK FOR EQUITIES | LEVEL OF RISK |
| US FED-Interest Rate Hike | |
| Current Valuations | |
| US FED-Tightening | |
| Commodity Price Inflation | |
| RBI-Sucking out Liquidity | |
| Geo Political Tension | |
| FII's Being a Net-Seller | |
EVENTS, NATURE OF IMPACT & ANALYSIS
Q3FY22 Corporate earnings
Now, we are at the peak of the Q3 FY22 corporate earnings season. And 25 companies in the NIFTY 50 index have declared their Q3 results. Out of these 25 companies, 12 companies have beaten the analyst estimates, 8 companies results are in line with market expectation and 5 companies have posted results lower than market expectation.
IMPACT: POSITIVE
Remarks: From the 25 NIFTY 50 companies results, we see there is a marginal dip of 1% in revenue as well as profits versus the estimates. However, their efficiencies have improved and the same is visible (2% up in operating profit - EBITDA). Earnings of companies in consumer staples, metals, auto and cement have got impacted due to commodity inflation, while the earnings of IT, Private banks, PSU Banks and NBFCs have posted better results than estimates.
IPO of LIC
As per the DIPAM (Department of Investment and Public Asset Management) Secretary, LIC is going to file its paper with SEBI towards IPO in second week of Feb, 2022.
IMPACT: NEGATIVE
Remarks: Embedded value of LIC (a key metric to value the insurance company) is expected to be around ₹5 lakh Cr. Since the Government is expected to sell around 5% equity in LIC, the quantum of money being raised from the market is going to be a historical high. Post listing, LIC’s market capitalization is expected to be among Top 5 listed companies in India. Due to the high quantum of money being raised from the market, we expect selling pressure in markets from both DIIs as well as FIIs to create the liquidity to participate in this IPO. The short term volatility will create better entry points in the market between Feb, 2022 to March, 2022 and the same is subject to the various approvals for this IPO.
Selling pressure in US Markets
NASDAQ 100 has corrected 12% from its peak and S&P 500 index has corrected 6.50% from its peak.
IMPACT: NEGATIVE
Remarks: There is massive sell-off and high volatility in US markets especially in high growth tech names. Many of the mid and small cap tech stocks have corrected more than 50% from their peak levels. The Mega cap stocks i.e Microsoft, Alphabet, Amazon and Apple are still holding the market. Due to this, the correction and volatility in headline indices are comparatively low. The main attributed the reason was 'US FED's two upcoming actions – raising of interest rate as well as tightening of its balance sheet'. Even Facebook and Netflix have suffered a major correction due to marginal misses in their earnings. As per current levels, markets are discounting the upcoming negative events of rate hikes etc.
10 Year G-Sec yield
10 year G-sec yield has moved from 6.45% in Dec, 2021 end to 6.68% in Jan, 2022 and it now hovers around 6.80%-6.90% range.
IMPACT: NEGATIVE
Remarks: There are negative news flows which is expected to impact the supply demand dynamics of G-Sec and the same has immediately caused the G-Sec yield to move to 6.90% range. It is basically negative for the Government since it has to borrow at higher rates.
The budget announcement of the Govt. borrowing from market in FY23 is higher than expectation (₹14.95 Lakh Cr in FY23 against ₹10.47 lakh crore in FY22). Apart from this, the expectation of tax sops for FIIs to enable the Indian G-Sec to include “Global bond index” was not announced. These are the major reasons for rising of G-Sec yield. As per current levels, we feel that the bond markets have discounted the negative impact and RBI will take the necessary action to bring down the yields.
Tax collections in India
In this FY21-22, the tax collection in 9 months was ₹14.74 Lakh Cr (53% higher than previous year).
IMPACT: POSITIVE
Remarks: Higher tax collections leads to lower market borrowing for Government. The same is expected to keep the G-Sec yields under check. There is a consensus that the Government’s tax collection expectation for next FY23 is conservative. Basically, the higher tax collection is a positive surprise and after many years, tax collections have crossed the estimates.
EVENTS, NATURE OF IMPACT & ANALYSIS
Q3FY22 Corporate earnings
Now, we are at the peak of the Q3 FY22 corporate earnings season. And 25 companies in the NIFTY 50 index have declared their Q3 results. Out of these 25 companies, 12 companies have beaten the analyst estimates, 8 companies results are in line with market expectation and 5 companies have posted results lower than market expectation.
IMPACT: POSITIVE
Remarks: From the 25 NIFTY 50 companies results, we see there is a marginal dip of 1% in revenue as well as profits versus the estimates. However, their efficiencies have improved and the same is visible (2% up in operating profit - EBITDA). Earnings of companies in consumer staples, metals, auto and cement have got impacted due to commodity inflation, while the earnings of IT, Private banks, PSU Banks and NBFCs have posted better results than estimates.
IPO of LIC
As per the DIPAM (Department of Investment and Public Asset Management) Secretary, LIC is going to file its paper with SEBI towards IPO in second week of Feb, 2022.
IMPACT: NEGATIVE
Remarks: Embedded value of LIC (a key metric to value the insurance company) is expected to be around ₹5 lakh Cr. Since the Government is expected to sell around 5% equity in LIC, the quantum of money being raised from the market is going to be a historical high. Post listing, LIC’s market capitalization is expected to be among Top 5 listed companies in India. Due to the high quantum of money being raised from the market, we expect selling pressure in markets from both DIIs as well as FIIs to create the liquidity to participate in this IPO. The short term volatility will create better entry points in the market between Feb, 2022 to March, 2022 and the same is subject to the various approvals for this IPO.
Selling pressure in US Markets
NASDAQ 100 has corrected 12% from its peak and S&P 500 index has corrected 6.50% from its peak.
IMPACT: NEGATIVE
Remarks: There is massive sell-off and high volatility in US markets especially in high growth tech names. Many of the mid and small cap tech stocks have corrected more than 50% from their peak levels. The Mega cap stocks i.e Microsoft, Alphabet, Amazon and Apple are still holding the market. Due to this, the correction and volatility in headline indices are comparatively low. The main attributed the reason was 'US FED's two upcoming actions – raising of interest rate as well as tightening of its balance sheet'. Even Facebook and Netflix have suffered a major correction due to marginal misses in their earnings. As per current levels, markets are discounting the upcoming negative events of rate hikes etc.
10 Year G-Sec yield
10 year G-sec yield has moved from 6.45% in Dec, 2021 end to 6.68% in Jan, 2022 and it now hovers around 6.80%-6.90% range.
IMPACT: NEGATIVE
Remarks: There are negative news flows which is expected to impact the supply demand dynamics of G-Sec and the same has immediately caused the G-Sec yield to move to 6.90% range. It is basically negative for the Government since it has to borrow at higher rates.
The budget announcement of the Govt. borrowing from market in FY23 is higher than expectation (₹14.95 Lakh Cr in FY23 against ₹10.47 lakh crore in FY22). Apart from this, the expectation of tax sops for FIIs to enable the Indian G-Sec to include “Global bond index” was not announced. These are the major reasons for rising of G-Sec yield. As per current levels, we feel that the bond markets have discounted the negative impact and RBI will take the necessary action to bring down the yields.
Tax collections in India
In this FY21-22, the tax collection in 9 months was ₹14.74 Lakh Cr (53% higher than previous year).
IMPACT: POSITIVE
Remarks: Higher tax collections leads to lower market borrowing for Government. The same is expected to keep the G-Sec yields under check. There is a consensus that the Government’s tax collection expectation for next FY23 is conservative. Basically, the higher tax collection is a positive surprise and after many years, tax collections have crossed the estimates.
What you should do. And should not.
Remain invested in equity for the long term BUT a 20%, correction is possible at anytime
Continue your SIPs and STPs, dont try to time the markets BUT you may get NO returns over 1 to 3 year period
ADD money on market dips if you are a Long Term Investor
Create Cash NOW if you need money in the short term
Conclusion:
Please remember investing is mostly backing quality businesses run by quality managements that offer a runway for strong cash flow growth, earnings potential, and long-term prospects. Buying them at a “reasonable” price with an eye on the returns is important. Stay invested, stay disciplined and secure your returns. We have prepared a sound long term holistic financial plan for you based on your risk profile, defined your financial goals along with you… did an asset allocation (with contingency plans built in) with you. We believe we are in the best objective position to help navigate the vagaries of the market.
