The year has started with a bang for investors but things are unlikely to remain hunky-dory with experts warning of greater volatility and other headwinds which include hawkish action from the Reserve Bank of India (RBI) and high raw material prices affecting margins and even consumption.

In a note, equity strategists Ridham Desai, Nayant Parekh and Sheela Rathi of Morgan Stanley reportedly said the January-March quarter would be eventful and volatile. Profit margins in the first half will be constrained as companies absorb the input costs.

The report said that while India out-performed emerging markets in 2021, given multiple events, there is likely to be price volatility.

The fears of the Morgan analysts on rising commodity prices were confirmed when FMCG major Marico said in a filing that continuing inflation slowed down consumption during the October-December quarter, and this trend affected the entire sector.

In its quarterly update, the company said rising inflation has impacted overall disposable income. However, rising mobility unleashed some degree of pent-up demand for discretionary goods, services and out-of home consumption.

While the central bank had retained the policy repo rate at 4 per cent and the reverse repo rate at 3.35 per cent , Riddham Desai feels the RBI will narrow the corridor between these two rates by raising the reverse repo rate in the February meeting.

Brokerages such as ICICI Securities expect the RBI to change its stance from the current accommodative by the June meeting.