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What awaits the markets in the second half of FY23?

Global turbulence, since the outbreak of the Russian-Ukrainian war, led to a V-shaped market trajectory in the first half of the current fiscal year.

In the three months to June, investors sought cover as stocks tumbled against the backdrop of a decade of high global inflation and disrupted supply chains.

However, from July to September, Indian equities recovered on the back of steady economic growth despite interest rate hikes by the Reserve Bank of India and the return of foreign portfolio investors.

Joseph Thomas, head of research at Emkay Wealth Management, says that H1FY23 was challenging for the markets. Impact of the Ukraine crisis, key shock absorbers of global inflation. The hard money policy of the US Federal Reserve, the ECB and the RBI affected liquidity.

The benchmark S&P BSE Sensex and Nifty50 indices fell about 2% each between April and September of this fiscal year.

In the broader markets, small-caps were hit harder, with the Nifty SmallCap Index falling around 9.5%.

By contrast, mid-caps were the only rewarding segment with the Nifty MidCap Index rising 3% over the period.

Among individual stocks, Adani Power and Mazagon Dock Shipbuilders more than doubled investor wealth in six months as they surged more than 100%.

On the downside, Brightcom Group, Tanla Platforms and TV18 Broadcast all cracked up to 65%.

Going forward, analysts expect India Inc.’s corporate profitability to take a hit in the second half of the fiscal year amid sustained monetary tightening.

Emkay Wealth Management’s Joseph Thomas says tight monetary policy, decreased liquidity will weigh on markets in H2FY23. Rising cost of borrowing will hit India Inc. Corporate profitability may be threatened. ‘Buy the dips’ to build a long-term portfolio.

That said, the short-term texture of the markets remains uncertain, with global headwinds weighing on sentiment.

In this holiday-truncated week, a host of macroeconomic data will guide stocks, including September GST collection data, manufacturing and services PMI data, and auto sales data.

Other than that, investors may see some fund turnover ahead of the second-quarter earnings season.

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