Rate hike cycle seems over:
India’s CPI Inflation has come off sharply to 4.7% in April 2023, coming under
RBI tolerance band of 6%, even WPI inflation declined on YoY basis in April. Decline in inflation pose well
for the rate cycle, this gives signal that rate hike cycle is probably behind now.
The gross GST collection remained strong at Rs1.57 tn (grew 12% YoY) in the month of
May-23, though it declined on MoM basis from Rs1.87 tn in the month of April. There is strong relationship
between economic activity and GST collection; therefore, rising GST collection giving us indicator for
rebound in economic activity.
Margin hike anticipated:
Commodity cost pressure has put margin pressure on many corporates in FY23.
The recent easing of commodity cost seems to aid the margins of India Inc. in near-medium term.
US Banking concern:
The failure of few US regional banks does raised concern on the US banking system,
however investor sentiments has gained due to swift action by the regulator to fix the situation early. This
remains the key watch area.
FII flows gaining strength:
FII flows remained positive with USD 4bn inflow in CY23YTD; however, DII
flows remain subdued during the month. Both DII and FII flows remained net buyers as of CY23YTD. With
global interest rates near its peak, expectation of respite in US inflation and pause by the US Fed in the
forthcoming policy meeting can further drive the FII inflows.