Resilient corporate earnings, robust capex outlay to propel markets higher

Global, domestic markets have recovered meaningfully post the interim low in September 2022 end primarily driven by easing inflation & consequent moderation in pace of interest hikes by central banks. Growth oriented Union Budget 2023-24 amid no major tweaks in the capital gain tax regime also kept domestic markets buoyant. The government proposes to spend a record | 10 lakh crore (3.3% of GDP) as capex in FY24E (up 33% YoY) with tangible multiplier effect, which could potentially drive broad based economic growth. Encouragingly, the government ensured that growth capex was bundled with path of fiscal consolidation. On the earnings side, Nifty EPS for the quarter came in at | 205/share, an outperformance of ~5% vs. our expectations. It was up 11% QoQ, 8% YoY. Outperformance was witnessed across the auto, capital goods, FMCG and pharmaceuticals space while the metals and oil & gas space underperformed. Management commentary was more upbeat on domestic demand vs. exports given the global macroeconomic uncertainty. With progressive Union Budget, capex cycle revival and healthy credit growth & asset quality in banking space, we retain our positive stance on domestic markets. We believe any dips should be used to build a long term portfolio of quality companies that have lean balance sheets, are capital efficient in nature and possess growth longevity.