Domestic equities started the year with strong gains across sectors. Nifty was up ~1.5%, while all major sectors in green except pharma. The broader market underperformed the main indices, Nifty MidCap is up 1.2% while SmallCap index is up 1.27%. Nifty bank was top performer with 2.6% gain followed by Metal (1.6%) and IT (1.27%). US equities backed with gains and closed higher last week. Looking back on 2021, the US market delivered solid gains, but the choppy action and sector rotation along with narrow leadership. Inflation is expected to be a focal point for the global markets in 2022. Rising prices have nudged the Fed into a hawkish pivot from its earlier predictions of transitory inflation. Now, the central bank is planning a quicker unwinding back of its pandemic-era monetary policies and has boosted its forecasts for the pace of potential rate hikes.
GST revenue collected in Dec'21 was over Rs1.29 lakh crore, up 13% YoY. Though the collection was lower than Rs 1.31 lakh crore in November, December is the sixth month in a row when GST exceed Rs 1 lakh crore. The GoI's focus is clearly on supporting growth through sufficient liquidity and low interest rates despite street fears over rising inflation, changes in interest rate policy by global economies and high commodity prices. However, India is at the beginning of capex revival phase and therefore corporate earnings recovery looks sustainable and premium valuations might sustain. We believe that India is better placed compared to major global economies in terms of handling Covid and its spread, while revival of capex and higher growth potential over next 1-2 years would keep Indian economy expansion ahead of many other nations. This would lead to bounce back in Indices. Recently rising Covid cases in India is of concern now and how it would shape up in coming days would key deciding factor for market trend in the month. We would remain cautious for the time due to recent Covid surge and Omicron issue.