Multiple headwinds such as the Ukraine war, inflation, rate hikes, concerns over slowing economic growth and uninspiring Q4FY22 earnings kept the market sentiment low as the domestic equity market underperformed major global markets in May.
As per a report by the brokerage firm Motilal Oswal Financial Services (MOFSL), the Indian market underperformed key global markets in May 2022 even as it has outperformed most major global markets in the current calendar year so far.
Nifty fell about 3 percent in the month of May while in the calendar year so far, the index is down about 4 percent. On the other hand, the China market is down 11 percent, S&P 500 is down 13 percent and Germany, France and Japan markets are down up to 15 percent.
Nifty Midcap 100 index fell 5 percent in May while the Smallcap 100 index cracked 10 percent. Among the sectoral indices, Nifty Metal suffered the most, falling 16 percent. Oil & Gas (down 10 percent), Realty (down 7 percent) and PSU Bank (down 7 percent) indices also lost significantly in May.
In the calendar year so far, the IT index has fallen about 23 percent, while real estate (down 15 percent), healthcare (down 11 percent) and media (down 7 percent) indices have also been the top laggards.
Among Nifty companies, 19 posted gains in May, led by auto and consumer stocks. Four out of the top 10 gainers were from the automobile space (M&M, Hero MotoCorp, Eicher Motors, and Bajaj Auto), Motilal Oswal pointed out.
On the other hand, 46 percent of Nifty components are trading higher in the calendar year. Coal India, NTPC, ITC, M&M, and Bajaj Auto led the gainers pack, with gains of over 15 percent in the year.
Corporate earnings continued to remain healthy in Q4FY22 and instilled a ray of hope, amid the grim situation plagued by the disruptions mentioned above.
"The MOFSL Universe earnings growth of 21 percent year-on-year (YoY) in Q4FY22, which was the lowest since Q3FY21, came on a high base of 99 percent growth in Q4FY21. While the aggregate growth appeared impressive, it was hardly broad-based and driven only by three sectors: BFSI, oil & gas, and metals," said Motilal Oswal.
As per Motilal Oswal, Nifty sales, EBITDA and PAT growth was in line at 23 percent, 16 percent and 21 percent YoY, respectively, against its estimates of 28 percent, 19 percent and 23 percent YoY, respectively, while PBT growth came below its estimate at 22 percent YoY against its estimate of 28 percent YoY. Among the Nifty constituents, 42 percent of the companies beat the brokerage firm's PAT estimates, while 26 percent missed.
Nifty earnings per share (EPS) for FY23E was reduced by 0.7 percent to ₹864 from ₹870 earlier, largely due to notable downgrades in the earnings of ONGC, Hindalco, JSW Steel, and Tata Motors. FY24E EPS was broadly unchanged at ₹1,002 from ₹1,003 earlier.
Disclaimer: The views and recommendations made above are those of the broking firm and not of MintGenie.