KYC

Macro Backdrop: Intensifying geopolitical strife has flung a pall of uncertainty around the global economy as it slows in the final quarter of 2023, albeit with considerable cross-country variations.

Europe appears to be on the edge of recession, China is stalling. The US has emerged as a key driver of global growth although its outlook is more uncertain now than before as it swings from hard landing to soft landing to no landing.

Several parts of Asia remain bright spots but in Latin America, activity is losing steam.

Globally, manufacturing is languishing while services sector activity appears to have reached the end of its post-pandemic expansion.

Labour markets are exhibiting signs of weakening and consumer, and business confidence is dented by the recent deep sense of insecurity as wars rage.
International trade is weighed down by the strong US dollar and the post-pandemic rebalancing of consumption.

The slowdown in international trade is encompassing a broad swathe of countries and a wide array of goods, specifically manufactures such as iron and steel, office and telecom equipment, textiles, and clothing
Although trade in services has remained resilient so far, the growth of global trade in goods and services in 2023 is going to be significantly below world output and lower than its average growth during the last decade.

The November PMI surveys saw the global manufacturing sector move closer to stabilisation.

Although the downturn in output extended to six consecutive months, the rate of contraction was negligible and the weakest during that sequence.
Business optimism also ticked higher, as companies' outlooks brightened despite the current continued market uncertainty and cost-caution.

The JP Morgan Global Manufacturing PMI rose to a six-month high of 49.3 in November, up from 48.8 in October, but remaining below the neutral 50.0 mark for the fifteenth month in a row.

Although all five of the PMI components continued to signal a deterioration in overall operating conditions, four (new orders, output, stocks of purchases and employment) signalled lesser rates of decline than in the prior survey month.

November data indicated that the downturn in world manufacturing production was mainly centred on the intermediate goods sector, where output contracted for the sixth month in a row (albeit at a slower pace).

In contrast, consumer, and investment goods producers both saw increases.
Source: **ICRA MFI Explorer, Bloomberg, RBI, MOSPI.

In the month of Nov’23, equity markets gave applaudable returns with Nifty 50 gaining by 5.52% on m-o-m basis following upbeat quarter end earning numbers, U.S. Federal Reserve kept interest rates on hold for the third consecutive time, fall in global crude oil prices and strong GDP data in the second quarter of FY’24 added to the gains. ­

Foreign Institutional Investors (FIIs) were net buyers in Indian equities to the tune of ₹ 9000.88 crores.

Goods and Services Tax (GST) shows highest ever collection of ₹1.68 lakh crore for Nov’23, 15% more than the corresponding period of last year and this points towards the growing trajectory of the Indian economy. The gross GST collection surpassed the mark of Rs. 1.60 lakh crore for the sixth time in FY’24.

The combined index of eight core industries increased by 12.1% in Oct’23 as compared to 0.7% in Oct‘22. The production of all Eight Core Industries recorded positive growth in Oct’23 over the corresponding month of last year.

Globally, US Equity Markets also went north amid expectations from investors that the U.S. Federal Reserve will cease raising interest rates. Additionally, there was reduction in fears about violence in the Middle East following Israel and Hamas's agreement to a ceasefire mediated by Qatar. European equity markets too rose on slightly easing geopolitical tensions and better than expected Eurozone business activity for Nov’23 data. Asian equity markets closed on a mixed note amid continuing concerns about the Chinese economy. Remarks from a Bank of Japan representative that it was too early to discuss policy normalization added to the losses.

Source: ICRA MFI Explorer