The document provides an overview of global and Indian markets and economic indicators in 2022. It discusses that 2022 was a volatile year due to factors like the Russia-Ukraine war, rising inflation, and interest rate hikes. In India, while sectors like IT and pharma struggled, others like banking and metals performed well. The Indian economy remained resilient with GDP growth of 9.7% in the first half of 2022-23, though inflation peaked at 7.79% in April. The rupee depreciated over 10% against the dollar while forex reserves declined. Manufacturing PMI showed continued expansion and exports grew 17.72% in April-November despite a global slowdown.

1. MACROSCOPE
January 2023

2. I N S H O RT
Debt Markets
Page 8
Global Markets
Page 6
I N S H O R T
Indian Markets
Page 7
Macro Indicators
Page 9

3. L O O K I N G B A C K AT 2 0 2 2
Year of ‘Polycrisis’
After a two-year liquidity-infused bull run, turbulence rocked the markets in 2022. The aftershocks of the Covid-19 pandemic
combined with the Russia-Ukraine crisis, supply shock in the energy markets and synchronized monetary policy tightening by central
banks across the world drove the narrative for an extremely volatile year. In February, Russia invaded Ukraine, which prompted most
western nations to introduce sanctions on the former. None of the major global indices managed to muster gains in 2022. The S&P
500 index slid more than 19% in 2022, putting it on pace for its biggest yearly percentage slide since 2008, when the benchmark index
crashed nearly 39%.
In India however, the unwavering faith of domestic investors kept D-Street relatively insulated from global shocks. They kept the faith
despite the steady inflow of negative headlines and absorbed the record sell-off by foreign funds. After a lackluster spell for most of
the year, the Sensex picked up momentum as the festive season approached. It closed at its all-time high of 63,284.19 on December 1,
2022. Nifty outperformed its global peers with gains of around nearly 3% in the calendar year 2022.
Year of Rate Hikes
As we approached 2022, it was clear that inflation was no longer going to be “transitory” and that central banks would have to unwind
their ultra-loose monetary policies. Furthermore, the war-induced shortages in key energy and agriculture commodities exacerbated
inflation, prompting central banks around the world to raise interest rates at a record pace. The sharp rise in rates took its toll on the
markets and caused a severe drawdown in most asset classes. In India, the interest rate, which was 4.40% in May 2022, closed the year
at 6.25%.
Sectoral Winners and Laggards in India
The two big winners of the Covid era - IT and pharma - were in for trouble in 2022 amid sectoral churning of investor portfolios. Old
economy stocks from power, utilities, capital goods and energy became the new stars of Dalal Street. Nifty PSU Bank index remained
the top gainer with nearly 54% gains. Nifty CPSE index surged nearly 20% and was the second-best performing sectoral index in
CY22, followed by Nifty FMCG index which rose nearly 18%. Nifty Bank index gained about 17%. Nifty Metal index advanced nearly
13%. Nifty IT index was the top loser as it fell 27% in CY22. Nifty Consumer Durables index declined nearly 16%, Nifty Realty plunged
about 15%, Nifty Media dropped about 14% and finally, Nifty Pharma fell around 10% in CY22.
FII Activity in India
As the U.S. Fed began rate hikes, Indian markets witnessed an unprecedented exodus, as the FIIs sold Indian stocks worth about $16.5
billion in CY22. The trend saw a reversal in July and August, but they reverted to selling in September and October, before turning
buyers again in November and December.

4. 2 0 2 3 O U T L O O K I N A N U T S H E L L
Markets in 2023 may lead the economic recovery we foresee for 2024. Therefore, we expect that 2023 may ultimately provide a series of meaningful
opportunities for investors who are guided by relevant market precedents.
Amid a volatile global macro backdrop, Indian corporates delivered better-than-expected performance across most sectors. BFSI led from the front,
yet again, while commodities dragged. Global cyclicals played a spoilsport. India’s economy has been remarkably resilient to the deteriorating external
environment, and strong macroeconomic fundamentals have placed it in good stead compared to other emerging market economies. However,
continued vigilance is required as adverse global developments persist. India is on track to becoming the world’s third largest economy by 2027,
surpassing Japan and Germany, and having the third largest stock market by 2030 - thanks to global trends and key investments the country has
made in technology and energy. While the current levels of valuations do cap the near-term upside in Indian markets, any corrections in the markets
may be used by long term investors to add to the equity positions.
On the US Front, we need to get through a recession that has not started yet. We believe that the Fed’s current and expected tightening will reduce
nominal spending growth by more than half, raise U.S. unemployment above 5% and cause a 10% decline in corporate earnings. The Fed will likely
reduce the demand for labor sufficiently to slow services inflation just as high inventories are already curtailing goods inflation. The relative health of
corporate and personal balance sheets has delayed an economic downturn, for now. We remind investors that over the past 100 years, no bear
market associated with a recession has bottomed before the recession has even begun. (Of course, there is a first time for everything.) We believe
that the current bear market rally is based on premature hopes that the recession will not occur - a so-called “soft landing” - and that there will not
be a meaningful decline in corporate earnings.
Secondly, we need to get through a deeper recession in Europe as it struggles through a winter of energy scarcity and inflation. We also need to see a
sustained economic recovery in China, whose prior regulatory policies and current Covid-19 policies curtail domestic growth. Third, we need to see
the Fed truly pivot. Ironically, when the Fed does finally reduce rates for the first time in 2023 - an event that we expect after several negative
employment reports - it will do so at a time when the economy is already weakening. We think this will mark a turning point that will portend the
beginning of a sustained economic recovery in the U.S. and beyond, over the coming year.
The Chinese economy is reopening to not just three months, but three years of pent-up demand. Going into the pandemic, households in China had
about 8 to 9 trillion RMB in cash in their bank accounts. Today that number is 15.5 trillion. It has gone up more than 50%, because for three years all
that people did was work and go home. They are more cashed up than ever before. Plus, mortgage rates have dropped 150 basis points. This could be
the year where Chinese Markets turn outperformers.

5. A S S E T C L A S S V I E W S
TA C T I C A L A L L O C AT I O N
U n d e r w e i g h t N e u t r a l O v e r w e i g h t
Large Cap
Mid Cap
Small Cap
Gold
Banking & PSU; Corporate Bonds
Credit Risk
Long Duration
C o m m o d i t y
D e b t
I n d i a
E q u i t y
I n d i a
Neutral
+1
J A N U A R Y 2 0 2 3
+2
Neutral
+1
Neutral
Neutral

6. I N S H O RT
G L O B A L M A R K E T S
It wasn’t a very merry season for the global markets
as the seasonal tailwinds paled in comparison with
the host of headwinds that equity markets have been
currently dealing with. Markets remained choppy and
mixed for most part of the month. Data from the U.S.
surprised on the upside -Q3 GDP recorded a growth
of 3.2%, above the estimate of 2.9%. Consumer
confidence data jumped sharply in December to its
highest level since April. Sentiment around the
economy and labor market improved, while inflation
expectations for the year ahead dipped to 6.7% - the
lowest in more than a year. However, it also meant an
increase in the risk of more Fed rate hikes. Finally, the
forecasts of a recession in 2023 and the raging Covid
infection in China made markets nervous.
European markets were pessimistic in the earlier part
of the month as they braced up for the Fed and ECB’s
rate hike decisions but closed flat as they wound
down for the Xmas season. Asian markets were under
pressure as they picked up cues from Wall Street
losses and news of Japan's core consumer inflation
data hitting a fresh 40-year high of 3.7% in
November. The surprise policy shift by the Bank of
Japan to allow long term interest rates to rise more
spooked the global markets. Global stocks recovered
slightly on November 28 after China said it would
open its borders next month, bolstering investors’
hopes that the thawing of the world’s second-largest
economy will support global growth. U.S., European
and Asian stocks inched lower on the final trading
session of 2022 amid volatility.
Source: Investing.com. Data as on December 30, 2022

7. I N S H O RT
I N D I A N M A R K E T S
Early December brought good tidings to D-Street with
benchmarks Nifty 50 and the BSE Sensex clocking
their all-time highs of 18,887.60 and 63,583.07
respectively, on December 1, 2022.
However, Indian indices came under pressure on
worries over economic outlooks in China, Europe and
the United States. IT stocks, which dragged Indian
indices lower, continued their downward trend amid
negative global cues and fear of recession. The U.S.
markets fell on concerns of further monetary
tightening owing to better-than-estimated Q3 GDP
numbers, which impacted Indian markets too. Indian
investors felt the pressure from global negative cues
as central bankers continue to maintain a hawkish
stance on inflation and future rate hikes. Hopes of a
year-end Santa Claus rally were also dashed as
spiraling COVID cases in China sparked renewed fears
of a global pandemic wave, sending the bulls scurrying
for cover.
The FIIs spent over $1 billion on Indian stocks before
going away for Xmas and New Year vacations.
During the final trading week of the year, domestic
benchmark indices managed to pare losses amidst
hopes of a quicker economic recovery due to faster-
than-expected virus infection peak. This resulted in a
few positive global cues on December 27, especially
from China as it rolled back its Covid restrictions.
Markets opened in green but moved lower during the
final trading session of the year and closed on a weak
note.
Source: Investing.com. Data as on December 30, 2022
Source: Moneycontrol.com. Data as on December 30, 2022
Source: BSEIndia/NSEIndia. Data as on December 30, 2022

8. I N S H O RT
D E B T M A R K E T S
Global bond markets suffered unprecedented losses in
2022, as they went through a huge resetting of
interest rates. Bond markets bore the brunt of central
bankers being wrongfooted by spiking inflationary
pressures – largely caused by historically-tight labour
markets, rising commodity prices due to the war in
Ukraine, and Covid lockdowns in China, which further
disrupted global supply chains. With the starting yields
low and the rate of change in tightening so fast, nearly
every segment of the fixed income markets
experienced declines - especially bonds with long
durations. After a long drought, some sense of respite
returned to the bond markets in early December on
the hopes of easing inflation and better-than-
expected consumer-price-index data released by the
U.S. Labor Department.
However, this was soon replaced by turbulence in the
global scene as the Bank of Japan loosened the
shackles on its 10-year yield target and said it would
review the operation of its yield-curve control policy.
This led to a jump in the yields. Post the Xmas holiday,
yields remained high as investors tried to assess the
path of interest rate hikes by the Federal Reserve and
China's decision to scale back its Covid-19 restrictions.
The yield on the U.S. 10-year Treasury settled at
3.88% on the final trading day of the year.
Tracking cues from its global counterparts, yields
remained elevated in India, with the 10-year G-Sec
hovering around the 7.3% mark in December ‘22. It
closed at 7.327% on the final trading day of the year.
Source: Investing.com. Data as on December 30, 2022
10-Yr Benchmark G-Sec: India
10-Yr Benchmark G-Sec: US

9. I N D I C AT O R S
2 0 2 2 I N R E V I E W
India’s growth
In the first half of the ongoing financial year, the Indian economy registered a GDP growth of
9.7%. GDP in the June ‘22-end quarter, though lower than the RBI’s projection, rose 13.5%
aided by an uptick in private consumption spending and gross fixed capital formation with a
moderation in government final expenditure. In the September ‘22-end quarter, GDP growth
slowed down to 6.3% with the normalization of base effect. The mining and manufacturing
sectors experienced contraction combined with high inflation, weak exports and increased
input prices in certain sectors.
Inflation
Consumer Price Index (CPI) inflation, or retail inflation, was above the RBI’s 6%-upper
tolerability threshold for ten consecutive months before easing to 5.88% in November ‘22. It
reached an eight-year high of 7.79% in April with rural inflation scaling to 8.4% and urban
inflation at 7.1%. Analysts attributed the rise to the sharp spike in food inflation - which rose
to a 17-month high of 8.4% from 7.7% on a sequential basis. Global surge in crude prices
which impacted food, fuel, light as well as transportation logistics contributed to high inflation.
Finally, the retail inflation rate eased to an 11-month low of 5.88% in November ‘22, marking a
fall below 6% for the first time in 2022, thanks to easing food prices.
Indian Rupee and Forex Reserves
The Indian rupee logged its worst yearly performance since 2013. It depreciated more than
10% and hovered near 83 a dollar. A stronger dollar, foreign fund outflows and higher energy
prices were headwinds for the rupee in 2022. With the inflation and rate hikes peaking out and
normalizing eventually by the second half of 2023, the rupee is expected to start appreciating
along with other Asian currencies. The country’s forex reserves were at $564.07 billion as on
December 9, 2022. Overall, they declined from $632.7 billion at the start of the year. The
central bank has been intervening in the spot and forwards market to protect the rupee and
preventing a rapid depreciation.

10. Domestic Economic Signals
Manufacturing Sector:
S&P Manufacturing Purchasing Managers’ Index (PMI) with respect to India recorded its best
in July and August at 56.4 and 56.2 respectively. Manufacturers encountered some headwinds
in the following months, post which the Index recorded its strongest upturn in output since
August at 55.7. The researchers concurred that notwithstanding heightened recession fears
elsewhere and a deteriorating outlook for the global economy, India’s manufacturing sector
continued to perform well. They were also aided by a substantial cooling of cost pressures in
November.
(The index is a weighted average of indices constituting new orders, output, employment,
suppliers’ delivery times and inventories. It indicates the overall health of the economy and its
key economic drivers such as exports, capacity utilization, employment and inventories, among
other things.)
Trade Deficit:
The merchandise trade deficit for the April-November 2022 stood at $198.35 billion against
$115.39 billion in the same period last year. The country's merchandise exports grew at a
modest rate in November 2022 after a sharp fall in October, as per the latest data shared by
the commerce ministry. India’s merchandise exports in November grew to $31.99 billion as
compared to $31.80 billion in the year-ago period. India's merchandise exports had shrunk
16.7% YoY to $29.8 billion in October 2022. India’s merchandise exports exhibited a positive
YoY growth in 15 out of 30 sectors in November and imports also surged in 19 out of 30
sectors YoY.
The commerce ministry stated that India’s trade is moving forward on the high growth wave
even with the high base of last year. Despite the global demand slowdown, exports
performance continues on the high growth run, with India’s overall exports in April-November
2022 estimated to exhibit a positive growth of 17.72% over the same period last year.
I N D I C AT O R S
2 0 2 2 I N R E V I E W

11. Financial Sector:
The financial sector played a key role in ensuring that India remained resilient amid rising
inflation, pandemic and war-related disruptions in fiscal 2022-23. The deepening and widening
of domestic credit during this period sustained businesses while providing retail loans to
support consumption-led growth. From the onset of the pandemic, credit flowed to traditional
sectors as well as newer and more accretive segments such as the Micro, Small and Medium
Enterprises (MSMEs). In addition, retail credit was more readily available to consumers as they
emerged from the pandemic to buy and renovate homes, purchase vehicles and consumer
durables. Recent Reserve Bank of India (RBI) data reveals that bank credit growth accelerated
to 17.2% in the quarter ended September 2022 from 7% in 2021.
Another noteworthy expansion was seen in the MSME sector, where the loan market grew
from ₹31 trillion in March 2020 to ₹36.4 trillion as of June 2022. Retail loans grew 16% in
the last year. Bank credit to non-banking financial companies (NBFCs) rose by 30.6 % YoY.
Finally, another interesting development of recent times is the financialization of retail savings
to bring new capital to equity markets in the form of systematic investment plans (SIPs). In
recent months, as foreign capital exited Indian markets, incremental retail investor money kept
Indian equity indices buoyant. It provided additional credit and boosted the overall economic
sentiment.
Tax Collections:
The Central government’s tax revenue has witnessed a whopping 303% jump in the last 12
years, from Rs 6.2 lakh crore in FY10 to Rs 25.2 lakh crore (revised estimates) in FY22. A
major contributor is the GST at Rs 6.75 lakh crore in FY22, followed by corporation tax at Rs
6.35 lakh crore and Rs 6.15 lakh crore under income tax. In the current financial year (FY23),
the Central government has mopped up Rs 16.1 lakh crore as the cumulative gross tax revenue
for the seven months from April to October 2022, driven by an increase in income tax and
corporate tax collections. India's corporate tax collections have exceeded 3% of the country's
gross domestic product (GDP) for the first time in two years, reflecting an overall improvement
in India Inc’s profitability.
I N D I C AT O R S
2 0 2 2 I N R E V I E W

12. Capital Formation
High Frequency Indicators:
India’s economic momentum has been sustained well in the third quarter of 2022-23 and there
is cause for cautious optimism as the slowdown in global economic activity is not mirrored in
India’s performance of various high-frequency indicators, the Finance Ministry stated on
December 23, 2022.
The ICRA Business Activity Monitor showed that Indian economy continues to remain resilient
as the monthly index improved to 13% in November 2022 from 7.4% in October 2022. The
composite tool that gauges economic activity each month posted an average YoY expansion of
10.2% in October-November 2022, only mildly lower than the 12% seen in Q2 FY2023,
indicating the momentum of domestic economic activity was resilient, despite the base
normalization and flagging external demand, as pointed out by the ICRA Business Activity
Monitor. Early December 2022 movements pointed to slightly discouraging trends, but
analysts expect a moderation especially given the base effect.
(The ICRA Business Activity Monitor is an index constructed using 14 monthly high-frequency
indicators - auto production (comprising passenger vehicle, motorcycle and scooter production
clubbed into a single indicator), the output of Coal India Limited, electricity generation, non-oil
merchandise exports, rail freight traffic, ports cargo traffic, non-food bank credit of scheduled
commercial banks, bank deposits, vehicle registrations, generation of GST e-way bills, domestic
airlines’ passenger traffic, petrol consumption, diesel consumption and steel consumption).
According to RBI’s August bulletin, funds raised for capital expenditure through banks,
financial institutions, external commercial borrowings, foreign currency convertible bonds and
initial public offers dipped 28% from ₹2,71,374 crore in FY20 to ₹1,94,548 crore in FY22.
India Inc has remained cautious in the wake of rising inflation, higher input cost pressures and
recession concerns. On the other hand, government kept capital formation rolling – central
government has spent over ₹9 lakh crore to build capital assets in past year and a half as per
Finance ministry data. Sectors such as electric vehicle (EV), cell manufacturing, semiconductor,
e-commerce and green energy are exhibiting mega investing plans.
I N D I C AT O R S
2 0 2 2 I N R E V I E W

13. Private Sector Performance
In the first two quarters of FY23 - most Indian businesses hunkered down against the
headwinds of an impending global slowdown, supply chain disruptions, rising interest rates as
well as input costs, and subdued demand. The realty, information technology (IT), consumer
durables, metals, pharma/healthcare, and consumer discretionary sectors came under pressure
over the past year due to global and local factors.
I N D I C AT O R S
2 0 2 2 I N R E V I E W
Investment as a percentage to GDP is 33% in FY23 versus 29.6% in FY22 and 30.5% in FY21. We
are seeing higher infra, railway, road and defence spend by government; real estate sector revival is
seen going by the housing sales figures that have crossed the pre-pandemic levels; PLI-driven
investments have just begun; EVs and renewables are seeing continued thrust and investments.
On the other hand, core inflation, widening of current account and trade deficits, and finally, pressure
on the rupee and its resultant impact on interest rates, and fund flows are concerns.
Several consumer-oriented sectors like
consumer durables, retail, and FMCG
were impacted by moderation in
demand on account of inflationary
environment and softness in rural
demand. Realty sector got impacted
with rising interest rates and the IT
sector remained under pressure owing
to uncertainty in global environment
and recession fears. The Power sector,
along with capital goods and auto, have
been the top three performers over the
past 13 months.
Summing up Macro positives and concerns for India:

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Data Sources:
Ace MF, ET Markets, Bloomberg, WSJ, Trading Economics, Business Standard, Financial Times, Financial Express, Reuters, Fortune India, MOSPI, NSO, NSE, BSE, Livemint Premium, The Hindu, Forbes, Investing.com,
moneycontrol.com, rbi.org.in, niftyindicies.com