Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities started of 2023 on a positive note as Nifty gained 0.5% while broader markets out-performed the main indices as Nifty Mid Cap and Nifty Small Cap were up 0.8% and 0.7% respectively. All of the sectoral indices ended in green except Nifty Healthcare (-0.4%), Nifty Pharma (-0.4%) and Nifty Consumer Durables (-0.3%). The Metal and Nifty Media were the major gainers which were up 2.4% and 1.2% respectively.
U.S. equities closed lower on Friday to finish off the worst year for the U.S. equity market since the financial crisis. The S&P 500 and Dow Jones closed 0.2% lower, while the Nasdaq fell 0.1%. With Friday's losses, the S&P 500 fell 19.4% in 2022, its largest calendar-year decline since a 38% drop in 2008. The Nasdaq Composite dropped 33% and stands at the same level as July 2020. The Dow, meanwhile, fell a comparably modest 9% in 2022, while the bond market suffered through its worst year in the modern history. The yield on the 10-year Treasury rose from around 1.5% at the beginning of 2022 to settle at 3.88% on Friday. This move triggered a sell-off across fixed income markets and weighed on housing, with the average 30-year fixed mortgage rate finishing 2022 near 6.4%, its highest year-end level since 2001.
The uncertainty of the impact of recession in 2023 lingers. Some are relying on central banks pivoting to interest rate cuts, and the resolution of the Russia-Ukraine conflict while others are on the lookout for risks that may throw markets back into turmoil. Central banks across the globe are warning about a prolonged inflation fight while Russia-Ukraine war and COVID cases in China threatening to keep energy and raw material prices high. Profitability expected to improve in 3QFY23 after earnings in 2QFY23 witnessed margin pressure. The markets are likely to remain volatile for the next couple of weeks.