Asian markets are currently trading lower, reflecting weak cues from Wall Street overnight. Investors are eagerly awaiting the release of China's house prices data for the month of July. The Nikkei is down by 1.03%, while the Hang Seng and Shanghai are also trading lower by 1.36% and 0.56%,

Sustainable growth criteria - stocks that have displayed sustained earnings growth (> nominal GDP growth) and not just base effects during recent times and are expected to do so going forward with RoE > ke (cost of equity). Earnings growth should also be accompanied by robust revenue growth closer to earnings growth.

The surge in headline CPI inflation to 7.44% YoY in Jul’23 is undoubtedly a jolt, but core inflation actually abated to less than 5% YoY for the first time in 39 months, with inflation receding across the entire spectrum of non-food categories. Vegetable inflation (+37.3% YoY in Jul’23) needs supply-side measures to improve distribution, and the steps already taken in the past month have helped rein-in vegetable inflation in Aug’23.

Indian equity markets saw healthy uptrend in July 2023 and ended higher for the fourth consecutive month. Market sentiments were boosted due to optimism about domestic growth, positive FPI inflows, and strong corporate earnings.

The Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.5% for the third consecutive meeting, citing the fact that CPI inflation remained inside its 2-6% targeted range. However, it retained a hawkish stance of “withdrawal of accommodation” as food (especially vegetable) inflation was set to push CPI inflation up to 6.2% YoY in Q2CY23.

Retail sales for the automobile industry as a whole rose by 10% YoY, but fell by 5% MoM in July 2023 to 17.7 lakh units. Two-wheeler retail sales were up 8.2% YoY to 12.3 lakh units, while car retail sales grew by 4% YoY to around 3 lakh units.

All segments of the industry, except for three-wheelers, observed a month-on-month fall during this period.

Multi Asset Strategy - August 2023

We present the key takeaways from the RBI’s August monetary policy (on Aug 10, ’23). The policy rates have been kept unchanged unanimously. The monetary policy transmission is still underway. The real GDP growth estimate for FY24 is unchanged at 6.5%, while CPI inflation projection has been hiked to 5.4% vs 5.1% in the last policy (June ’23).

Asian markets are trading mixed as investors analyze the recent US inflation data, which came in slightly below estimates. Nikkei is showing a gain of 0.84%, while Hang Seng and Shanghai are both experiencing declines of 0.77% and 0.96%, respectively.