● Interest rate and Inflation: The hawkish comments of the US Fed chair at the recently meeting may correct the market’s perception of the US Fed easing on rate hikes in the near future. The US Fed is entirely focused on bringing down inflation to intended levels and has signaled further rate increases to induce a slowdown in US economic activity and demand in order to curb inflation and inflation expectations. Faster rate hike by US Fed than current expectation may lead to follow up action by other central banks in our view.

● GST collections: GST collection continues to remain robust even in the month of August 2022 at Rs1.44 tn. Govt. has now achieved nearly 50% of its full year GST target in just 5 months. The continued high collection momentum suggests that government might overshoot its GST collection target, which can also help government exceed the overall receipts target. Higher GST collection does provide comfort on overall fiscal position of the government.

● High and volatile energy prices: Crude prices have remain volatile and moved between 90-105 dollar per barrel range, keeping the markets anxious. Also, rising gas prices in EU needs to be closely monitored for any adverse economic impact. However, the Indian government is planning to tweak the natural gas pricing policy to cushion consumers from global shocks and ensure fair rates for both buyers and producers.

● Quarterly earnings: Corporate earnings in last quarter was mixed bag. While there has been cautious commentary on demand by few industries however material demand weakness has not impacted the operations as yet. Margin pressure were seen across multiple industries. As the benefit of the recent moderation in commodity cost starts to accrue in 2HFY23E, we expect other sectors like Consumer, Autos and Cement profitability to improve going forward.

● Monsoon update: As at end of August, Rainfall level is 7% higher at PAN India level. India is likely to receive normal rainfall between 94-106% of long term average state-run IMD predicted. This is likely to be 4th consecutive year of normal monsoon. However, rainfall level varries at state level with few states in north have deficient rainfall till date whereas few southern states have seen excessive rainfall.