Emerging markets such as India have always run higher inflation rates than developed economies such as the US and countries of Western Europe. But for the first time in the past 30 years, the US reported a higher consumer price inflation (CPI) rate than India in five consecutive months. The US reported a CPI rate of 7.5 per cent in January 2022 against 6.01 per cent in India and analysts expect the trend to continue for at least a few months more

The biggest headwind to the consumption story in FY23 is a sharp decline in government subsidies on food, fertiliser and fuel, and overall decline in revenue expenditure net of interest payments. This, analysts say, will adversely impact purchasing power of households at the lower end of the income pyramid, translating into lower spending on consumer goods and services.

Owing to a big rise in the market capitalisation of group companies such as Adani Green Energy and Adani Transmission, the group promoters, the Gautam Adani family, have closed the wealth gap with Mukesh Ambani, the promoter and owner of Reliance Industries Ltd (RIL). Ambani continues to top India's billionaire league table. The Ambani family's net worth was estimated to be Rs 8.06 trillion (around $108 billion) on Tuesday against the Rs 6.87 trillion (around $92 billion) of the Adani family.

The Tata group companies are now more valuable than all the listed central public sector undertakings (CPSUs) or companies in the country. The key 20 listed Tata companies ended the 2021 calendar year with a combined market capitalisation of Rs 23.36 trillion, ahead of the 70 listed CPSUs, which had a combined m-cap of Rs 23.2 trillion. In comparison, these CPSUs had a combined market capitalisation of Rs 16.7 trillion at the end of December 2020 against the Tata group firms' combined m-cap of Rs 15.7 trillion.

India's top listed companies reported their best-ever quarterly net profit of Rs 2.39 trillion in the September quarter of FY22, up 46.4 per cent year-on-year. The earnings were driven by a big surge in the profitability of banks, non-banking financial companies & insurance (BFSI), oil & gas, and metal & mining firms. The combined net profit of these three cyclical sectors were up 87 per cent YoY to a record high of Rs 1.53 trillion, up from Rs 82,000 crore a year ago and Rs 1.08 trillion in Q1FY22.

Its production declined for the third consecutive year in financial year 2020-21 (FY21) to an 11-year low, while sales volume contracted for the second year to the lowest since FY15. The company manufactured around 1.08 million vehicles last fiscal, a decline from 1.17 million the previous year, and a steeper fall from its all-time high tally of 1.62 million reported in FY18.

After outperforming the broader market and their public sector peers for the better part of the post-Lehman period, private sector banks - such as HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank - are now underperforming. Last week, the Nifty Private Bank index was up just 6 per cent year-to-date in the calendar year 2021, against nearly 13 per cent rally in the Bank Nifty and a 15 per cent rise in the benchmark Nifty50. Public sector (PSU) banks, such as State bank of India, Bank of Baroda, and Punjab National Bank, are now rally leaders and outperforming the broader market. The Nifty PSU Bank index was up 42 per cent since the beginning of this calendar year. But on a longer term, the Nifty Private Bank index is up 101 per cent since March 2016, against a 118 per cent rally in the Bank Nifty and just 2 per cent rise in the Nifty PSU Bank index in the period.

The market's sensitivity to the US Fed's balance sheet changes makes it vulnerable to the possible tapering of the bond buying programme and the resulting stagnation or even shrinkage in the balance sheet.

Top companies have grabbed a bigger pie of their sectors in the pandemic period, leading to a further rise in market concentration in many industries as measured by the Herfindahl-Hirschman Index (HHI). The HHI score, which indicates competitive intensity in an industry (or a lack of it), reached a new high in FY21 as bigger firms raised their revenue market shares either organically or through mergers and acquisitions. A higher HHI score indicates a rise in market concentration in favour of a few firms while a lower score means that the industry's revenue is more evenly divided among many companies

The rally in mid- and small-cap stocks has spilled over into the IT sector as well. Second and third-tier IT stocks, which historically traded at a discount to the big five IT companies, are now trading at nearly 25 per cent premium to their large-cap peers. The smaller IT companies have a price-to-earnings (P/E) multiple of nearly 38 times against the big five's current P/E multiple of around 31x.

Mobile operators with the exception of Reliance Jio are in a much worse financial condition than expected earlier. The combined borrowing of the four incumbent operators - Bharti Airtel, Vodafone Idea, Bharat Sanchar Nigam (BSNL), and Mahanagar Telephone Nigam (MTNL) - reached an all-time high of Rs 3.85 trillion at the end of March this year. The companies' combined debt was up 22.4 per cent year-on-year last financial year against 8.3 per cent growth in their borrowing in the previous year. As a result, the incumbent operators' debt-equity ratio shot up to an unsustainably high level of 6.83X at the end of March this year from 2.3X at the end of March 2020. This was largely due to big losses reported by all these companies last financial year. The four incumbent operators racked up combined net losses of Rs 70,000 crore in FY21.

The 14 listed Tata group companies in which Tata Sons holds a stake are paying out a record Rs 35,441 crore to their shareholders by way of dividends and share buyback for FY21.

Smaller stocks continue to shine at the bourses. The BSE MidCap index is up 18 per cent since the beginning of January this year against a 5 per cent rise in the Sensex during the period. With the current rally, the mid-cap index has doubled in value since the end of March 2020 against a 70 per cent rally in the Sensex during the period. On Tuesday, the mid-cap index closed at 21,232, as compared to 17,941 at the end of December 2020. In the same period, the benchmark index moved from 47,751 to 50,193.

India's top IT companies have shown a hiatus between their performance on the bourses in the pandemic period and earnings growth. The combined market cap of the top five IT companies - Tata Consultancy Services, Infosys, Wipro, HCL Technologies, and Tech Mahindra - is up 87 per cent since the end of March 2020. In comparison, the benchmark BSE Sensex is up 68 per cent during the period. So the industry beat the broader market by a big margin in the last one year.

The combined dividend payout by early-bird companies -- those that have declared their results for FY21 -- is up 8.9 per cent, lower than the 21.9 per cent rise in in FY20 but ahead of the underlying growth in India Inc business last year. Combined net sales of these early birds were down 1.8 per cent last financial year while net profit was up 27.3 per cent in FY21. Some top companies that have stepped up dividend payout in FY21 include Hindustan Unilever, Indus Towers, Tata Steel, Ultratech Cement, Larsen & Toubro, Dabur, Asian Paints, and UPL. In contrast, banks have skipped dividends under an RBI diktat while companies such as Marico, TCS, Maruti Suzuki, and Godrej Consumer are paying lower dividends for FY21.

Thanks to a continued rise in the market capitalisation of the Adani Group companies, its promoter Gautam Adani is now the second richest Asian and fourteenth richest businessman in the world with a networth of $66.5 billion. Reliance Industries promoter Mukesh Ambani remains the wealthiest businessman in Asia with a networth of around $76.5 billion, according to Bloomberg data. The six Adani Group companies had combined market capitalisation of Rs 8.36 trillion as on Thursday, against Reliance Industries' market capitalisation of Rs 12.6 trillion. Adani Green tops the charts in the group with m-cap with Rs 1.99 trillion.

Historically, Tata Steel has always been among the biggest companies in the group in terms of m-cap, revenue, and profit but its fortunes began to decline after 2010 due to a sharp decline in the profitability of its European operations that it had acquired in 2007. The company was hit by a sharp rise in its debt level after this acquisition. First, it lost out to Tata Motors in terms of revenue in FY11 and then in March 2015, Titan beat it to become the third-biggest firm in the group in terms of m-cap. In FY20, TCS reported higher revenue and Tata Steel had become the third biggest company in that terms.

The group companies now lead the market capitalisation league table in sectors such as ports, power generation, gas distribution and transmission, and power transmission and distribution, ahead of incumbents in both public and private sector. This has Gautam Adani family the second wealthiest in business in India.

Earnings growth in the early-bird sample has been driven by banks and iron & steel companies.

However, experts caution that investors should not expect the big returns they got from the sector between March and September 2020.