Mirae asset mutual fund recently shared a report on their equity market outlook – April 2023 and review on the Yield Movements in the last FY. Here are some of the interesting charts from the report:
GDP Holds up even during periods of poor rainfall
Strength in SIP Book is secular
Equity flows - From CY10
US recessions have not always led to negative market outcomes (During crisis or the 6 months after the crisis)
Improving capacity utilization and corporate health – should support private capex
A robust GDP growth should support a robust earnings growth in this period
Fixed income space
Certificate of deposit
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For FY23, 1Y Certificate of Deposits (CD) saw the highest growth in yield ~338 bps.
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For quarter ending Mar-23, the YoY growth in outstanding CD (CDs which are currently bought by investors and are due for maturity at particular time in future) was at ~50.4%.
Bank credit growth v/s deposit growth
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Credit offtake rose by 15% YoY as on Mar-23. Whereas, deposit growth witnessed a slower growth at 9.6% YoY during same period.
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In absolute terms, Credit offtake expanded by ₹17.8 lakh crore to ₹136.8 lakh in Mar-23 from Mar-22. The growth was driven by personal loans, robust growth in NBFCs, and higher working capital requirements due to inflation.
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A wide gap in credit and deposit growth, lower liquidity and strong credit demand have been driving factor for higher yields in FY23, apart from interest rate hike.
AAA rated Corporate Bonds
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For FY23, AAA rated corporate bond papers in 1 year segment saw highest hike of ~286 bps.
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Corporate bond issuances in Mar-23 stood at Rs 1.08 lakh crore, nearly 33% higher on YoY basis driven by surge in credit demand.
G-Sec
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The trading volume in G-Secs (including T-Bills and SDLs) reached a two-year high of ₹27.7 lakhcrore during Q2 FY23, registering a YoY growth of 6.3%.
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Increased investor interest and issuances to fund GOI capex, increased short term G-sec yields.This further flattened the sovereign yield curve.
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1Y G-sec yields saw the highest increase in FY23 of ~242 bps.