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BFSI Chronicle, 11 Edition September2022
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An era of high inflation, severed Supply Chains to be slower than the rest of the world. Besides, RBI
& extreme volatility - The larger pain point for has over $630 bn of forex reserves to counter any
corporate India is of higher raw materials cost currency shocks.
pressures or commodity cost inflation. The ongoing
challenge business is facing is not on the demand side, Despite several concerns on inflation and war
but on the cost side of the equation or supply chain conflict, there are reasons to be positive on Indian
disruption including logistic and freight challenges. markets given that Corporate capex outlook is
This may probably have temporary negative impact looking up after many years of continuous decline.
on the margins of corporate sector in the near term. Earnings of capital goods companies are at cyclical
Though firms with pricing power and ability to lows and can improve significantly as there are
pass-on cost hikes are better placed. all indications of capex cycle picking up. India
manufacturing PMI for Feb came in at 54.9 vs 54
So far, a large part of inflation appears to be supply in the previous month showing some sequential
chain side related issues and not completely demand improvement. Furthermore, sentiment had improved
led inflation. Earlier it was driven due to covid in Feb, underpinning business expansion plans and
related supply issues and now partly led by supply return of normalcy. India’s macro data shows that
constraints due to Russia-Ukraine crisis. While the recovery is building. GDP, fiscal, PMI, core sector
US FED has turned hawkish by signaling multiple and credit data suggest that after a hiccup in Jan,
rate hikes in 2022 to counter inflation trends, we fundamental recovery is building up, but gradually
believe, RBI has ample strength to take care of
liquidity. Interest rate tightening in India is expected On valuations, there were several good quality

The Institute Of Cost Accountants Of India

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