GCM Capital Advisors Ltd Management Discussions

MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT

ANNUAL OVERVIEW AND OUTLOOK ECONOMIC OUTLOOK

Policymakers the world over are currently facing a predicament. The last two years have seen the global economy struggling to deal with overlapping crises, the latest being the liquidity troubles after a series of global bank crises. While the impact appears to have been contained, these uncertainties continue to undermine the confidence among consumers and businesses to spend, therefore impacting economic growth.

The World Bank now fears that the ongoing slump in global economic growth will likely result in a "lost decade." Despite this gloom, many market analysts believe that this could well be Indias decade. And there are enough reasons and data to back this claim. Recent data revisions by India suggest the economy has fared better than previously believed despite continuing global uncertainties. The International Monetary Fund (IMF) expects India to grow by 5.9% in FY 2023-24 and by an average rate of 6.1% over the next five years.

However, capital investment, especially in the private sector, has lagged so far. India is an attractive investment destination is a point well emphasized. The question is, why has private investment not yet picked up sustainably, and what can policymakers do to take advantage of this window of opportunity.

Our overall outlook for the Indian economy remains positive: We expect investments to see a turnaround and thrust the economy into sustainable growth. India will likely grow at a moderate pace of 6.0%-6.5% in FY 2023-24, as the global economy continues to struggle. Growth in the next year will likely pick up as investments kick start the virtuous circle of job creation, income, productivity, demand, and exports supported by favorable demographics in the medium term.

It looks like the world has come out of the shadow of the pandemic and has, in fact, learned to live with it. However, geopolitical crises, supply chain reorientations, global inflation, and tight monetary policy conditions will weigh on the outlook. We have delved into these challenges in detail in our previous outlooks.

INDUSTRY OVERVIEW

The Indian stock market has been a centre of attention for investors and analysts alike in recent years, with its ups and downs creating a sense of uncertainty for those investing in the market. However, as we move into 2023, the outlook for the Indian stock market prediction seems positive, with a projected growth rate of 7.5% to 8%.

The Indian stock market has been through a roller coaster ride in the past few years. From a record-breaking bull run to the COVID-19-induced crash, investors have experienced both the highs and lows of the market. As we move into 2023, the market outlook seems promising, and investors are eager to know about the stock market predictions for the year ahead.

Most experts predict a bullish market outlook for the Indian stock market in 2023. Positive economic growth and government policies are expected to drive up stock prices. Additionally, the low-interest rates and ample liquidity are expected to attract investors toward equities. The return on foreign investments is also expected to further fuel the markets growth.

OPPORTUNITIES & THREATS

Opportunities

Bullish Market Outlook

Most experts predict a bullish market outlook for the Indian stock market in 2023. Positive economic growth and government policies are expected to drive up stock prices. Additionally, the low-interest rates and ample liquidity are expected to attract investors toward equities. The return on foreign investments is also expected to further fuel the markets growth.

The Growth of Emerging Sectors

The Indian economy is evolving, and several emerging sectors like e-commerce, healthcare, and technology are gaining momentum. The increasing adoption of digital technologies and e-commerce platforms is expected to drive growth in these sectors, and investors are likely to see promising returns in these areas.

Boost in Infrastructure Development

The governments focus on infrastructure development is expected to create a positive impact on the stock market. The initiatives like the National Infrastructure Pipeline and the Atmanirbhar Bharat Abhiyan are expected to create opportunities for companies in the infrastructure and construction sectors. This, in turn, is expected to drive up the stock prices of these companies.

Increase in IPOs

Initial Public Offerings (IPOs) are a great way for companies to raise capital and expand their businesses. In 2023, many companies are expected to go public, and this could create a positive impact on the stock market. Investors can expect to see promising returns from IPOs of companies that have strong growth potential.

Greater Foreign Investments

Foreign investments play a crucial role in the Indian stock markets growth, and 2023 is expected to see a surge in foreign investments. The governments focus on ease of doing business, a stable political environment, and promising economic growth are likely to attract foreign investors to the Indian stock market.

While the predictions seem positive, investors must remember that the stock market is volatile and unpredictable. Its essential to have a diversified portfolio and invest in stocks that have a strong growth potential. Investors should also keep an eye on global economic conditions and the government policies that impact the stock market.

Conclusion

In conclusion, the Indian stock markets outlook for 2023 seems promising, with a bullish market expected, growth in emerging sectors, a boost in infrastructure development, an increase in IPOs, and greater foreign investments.

However, investors must exercise caution and make informed decisions while investing in the stock market. With the right strategy and approach, investors can take advantage of the markets growth potential and see promising returns in 2023. For more information about stock market prediction.

Threats

Indias higher valuation compared to the rest of the world which had peaked at 110% compared to EM, and 60% compared to MSCI World and now stands at a low 60% and 20% premium respectively which could be justified.

The world is probably undergoing a Risk ON trade since the interest rate hikes are largely behind us, with the possibility of one more hike in May; and 2H2023 could see rate cuts. This PIVOT is leading to investors betting on relatively riskier economies with a view they may jump back faster.

The failure of Silicon Valley Bank and two other regional banks; along with CS being bailed out by UBS has led to the US government increasing their Debt by almost US$ 400 bn in the month of March to arrest the economic downturn.

So though Money supply Growth being flat is the lowest growth in 15 years; the 2-year and 10-year interest rate in the US after peaking to 5% and 4% respectively has fallen to 4% and 3.5% suggesting a possibly lower recession in the US but an imminent one.

The consequences of the above action would be falling inflation and falling Global demand and cut in earnings estimates which has already started.

GDP globally is projected to grow at just 2.6% in 2023E (Source- IMF data) the weakest since 93 excluding the Pandemic and GFC. Chinas early reopening and resilience in European data should help strengthen global growth however the US slipping into recession in H2 -23 could be a bigger concern.

Indias growth is relatively resilient so far and the external risk has receded.

The Indian high-frequency data though softened in the last few months still remains robust especially for the domestic side.

The Indian banking sector credit growth of 15%+ though lower than its peak of 17% much higher than the average growth of 11% India has witnessed in the last 5 years (Source- Co data, JMFS); and a recent pick up in the deposit rates to over 10% along with constant retail demand as showcased in credit card sales are key positives.

RISKS AND CONCERNS

GCM Capital Advisors Limited (GCM) has exposures in the business of finance and Investments. GCM are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, human resource risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.

MARKET RISK

The Company has quoted and/or unquoted investments which are exposed to fluctuations in stock prices. GCM continuously monitors market exposure in equity and, in appropriate cases, also uses various derivative instruments as a hedging mechanism to limit volatility.

LIQUIDITY AND INTEREST RATE RISK

The Company is exposed to liquidity risk principally, because of lending and investment for periods which may differ from those of its funding sources. Management team actively manages asset liability positions in accordance with the overall guidelines laid down by various regulators. The Company may be impacted by volatility in interest rates in India which could cause its margins to decline and profitability to shrink. The success of the Companys business depends significantly on interest income from its operations. It is exposed to interest rate risk, both as a result of lending at fixed interest rates and for reset periods which may differ from those of its funding sources. Interest rates are highly sensitive to many factors beyond the Companys control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and, inflation. As a result, interest rates in India have historically experienced a relatively high degree of volatility.

The Company seeks to match its interest rate positions of assets and liabilities to minimize interest rate risk. However, there can be no assurance that significant interest rate movements will not have an adverse effect on its financial position.

HUMAN RESOURCE DEVELOPMENT

The Company recognizes that its success is deeply embedded in the success of its human capital. During 2022-2023, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable to the Company.

COMPLIANCE

The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company continues to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Companys Board of Directors and the Companys Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis.

The Company has complied with all requirements of regulatory authorities except delay in complying with the provisions of SEBI LODR Regulations, 2015. Delay was mainly due to the difficult phase of COVID-19 pandemic wherein the normal life was disrupted and staffs were forced to perform their duties with limited resources. The Company has made payment of penalty of Rs. 0.73 Lakh to BSE. No penalties/strictures were imposed on the Company SEBI or any other statutory authority on any matter related to capital market during the last three years.

Mumbai, August 18, 2023	By order of the Board
	For GCM Capital Advisors Limited
	S/d-
Registered Office :	Vicky S. Agarwal
805, Raheja Center, 214, Free Press Journal Marg,	DIN:09163278
Nariman Point, Mumbai-400021	Chairman & Managing Director