Beating the Street

Indian markets and companies have done well lately amid the global weakness. What's next?

- ANAND TANDON

The Q2FY23 result season is now over and the outcome is better than the consensus. Nifty constituents delivered profit growth of over 9 per cent, even as EBITDA margins contracted by almost 4 per cent YOY. Much of the 29 per cent increase in sales was largely absorbed by cost increases.

MSCI Index for developed markets is down 18 per cent since January, while MSCI Emerging Markets has dropped 24 per cent over the same period. As against this, India is down only 3 per cent, making it one of the best-performing markets in the world. Among comparable economies, only Brazil (13 per cent) and Mexico (3 per cent) are in the black. Is the outperformance likely to sustain? It may, though it appears fragile.

Employment recovery but with lower salaries

After a sharp uptick in numbers, caused by COVID, unemployment figures are finally dropping. MNREGA too reflects this trend, with job demands coming down in the past quarter. Despite this, consumption trends, especially in rural India, remain subdued. Many job seekers have become employed in lower-paying jobs. Stagnant rural wages, coupled with high inflation, implying that real wages have contracted. With food inflation remaining at elevated levels, lower-income households are likely to be affected as their consumption basket is more oriented towards food. The government's policy to continue to supply foodgrains for free has undoubtedly helped in alleviating stress but at the cost of rising fiscal pressure on the government.

Interest-rate increase doesn't suffice