Vijay Kumar Gaba

In the pre-finfluencer era, we used to have gods in the financial markets. Those gods would make an occasional public appearance and talk about their views on markets and investment strategies. The market participant would listen to these gods with rapt attention and follow them religiously. All those Buffets, Mungers, Rogers, Finks, Woods, Jhunjhunwalas, Damanis, et. al. were revered names. Then TikTok, Instagram, and X (formerly Twitter) happened. Financial experts, economists, monetary theorists, and technical gurus mushroomed at the rate of 100 per hour.

Everyone who has traded stocks or crypto for three months is now an expert. They not only try to influence other investors/traders by giving unsolicited advice and recommendations; but also get influenced by the advice/recommendations of others who may not be any better than them. Sometimes it appears that there are more experts in the market than the actual number of investors and traders. Unfortunately, this is the situation worldwide.

Misallocation of capital and unwarranted and avoidable losses are some natural consequences of this phenomenon. However, a more significant consequence is a diminution of traditional correlations.

A multitude of market influencers is driven by individual positioning as against a conceptual understanding of finance and economics. There are no dominating views in the markets. Each influencer is influencing multiple traders and also getting influenced by multiple other influencers. Since more positions are driven by intuitions rather than fundamentals, the divergence between market prices and fair values is wider, and lasting much longer.

For example, consider the following:

Gold and bonds are trading in opposite directions. Gold, traditionally considered a hedge against a drop in real rates, started firming up in 2022. However, now that 2024 rate cuts are getting dropped from foreca500sts, gold has given its best 2-month performance in decades.

This divergence of gold from real rates, against the historical trend, is being explained from a variety of angles. Some believe that a US sovereign downgrade may be imminent. Others explain this as a move away from USD in a worsening geopolitical scenario. However, the equity positioning and tech valuations do not corroborate any of these views.

Similarly, equities and rate expectations are also diverging against the historical trend. In the past six months, S&P500 has rallied 25% despite hopes of 2024 rate cuts fading fast.

Recently, Jamie Dimon, CEO of JPMorgan, was quoted as saying, “We are prepared for a very broad range of interest rates, from 2% to 8% or even more”. Larry Summers, Former Treasury Secretary, a very reputable name in financial markets also said, “You have to take seriously the possibility that the next rate move will be upwards rather than downwards”. Michelle Bowman, FED Governor, also said, “I continue to see the risk that at a future meeting, we may need to increase the policy rate further should progress on inflation stall or even reverse."

But no one appears to be listening to these experts. Professional TikTokers are getting more attention than them. I will not be surprised if the people who trade on their advice learn some basic investing lessons paying a heavy price.

We are currently in a market phase where most asset prices are rising. Equity indices (Nifty over 22200) are close to an all-time high. Gold prices (over US$2125/oz) are at an all-time high. Bond prices (benchmark 10-year yields 7.05% from 7.50% a year ago) have recovered from their recent lows. Bitcoins (US$66000) are trading at an all-time high. Real Estate prices in India are also close to their highest levels in most metros.

Not putting all eggs in one basket is perhaps one of the oldest risk management techniques. In the financial investment parlance, this is commonly called “diversification of portfolio”. Over the years this technique has worked well for investors in managing risk.

The first tranche of Sovereign Gold Bonds (SGB 2015-I), issued in November 2015 are maturing tomorrow (30 November 2023). The final redemption price of the bond has been fixed at Rs6132 per SGB unit. SGB carries a coupon rate of 2.5% p.a, payable at six-month intervals. The investors in SGB (2015-I) have thus earned a 12.7% CAGR on their investment.

To put this return in context, the Nifty50 index has grown at 12.4% CAGR in this period. An average Large-cap mutual fund has yielded ~13.75% CAGR; an average Small-cap fund has yielded ~23% CAGR and an average Gilt fund has yielded ~7.25% CAGR over the past eight-year period.

Of course, the return of equity and gold are not comparable as equities carry much higher risk and entail significantly large volatility. The risk profile of SGB and a normal gold ETF is different since SGB bears a coupon of 2.5% p.a., has no management fee, and carries an implicit sovereign guarantee. It may be considered better than holding physical gold as it is offered in dematerialized form and thus has no holding cost or theft risk; though there is a potential roll-over risk. Besides, if held till maturity, the return on SGB is exempt from capital gains tax, unlike Gold ETF and physical gold which are subject to usual capital gain tax.

The household investors who shall receive the redemption amount in a day or two therefore face two questions —

(i)      Whether they should maintain their allocation to gold, reduce the allocation, or increase the allocation under the current circumstances?

(ii)     Whether they should wait for the next issuance of SGB and redeploy the redemption proceeds in such bonds (last SGB issue happened in September 2023 @Rs5923)?

I would like the household investors to consider the following data points in answering these two questions:

·         A significant part of return on gold is due to the depreciation in the INR as compared to USD. Adjusted for USDINR variation, SGB (2015-I) return would be ~10.3% as compared to the present 12.7%. A weaker USD, as widely expected, could negatively impact the SGB returns in future.

·         The current USD gold price is almost the same as it was in July 2020. In this period Indian gold prices have risen ~20%. Adjusted for USDINR changes and hike in custom duties, the Indian gold prices have hardly changed since then. So, investment in gold has been more of a currency and duty arbitrage than anything else. Remember, the last three years have seen pandemic, massive monetary dilution, unprecedented fiscal profligacy, four-decade high inflation in the developed economies, worst geopolitical crisis in Iraq war, huge gold buying by central banks – all catalyst for a super bull market in gold, if we analyze from a historical perspective.

·         At the current price, SGB issued in August 2020 are yielding ~5.5% CAGR only, less than an average gilt fund. Considering that interest rates might have peaked, return in gilt funds could improve further in the coming years.

·         Bitcoin, which is gaining popularity as an alternative asset, has massively outperformed gold in the past eight years, three years and one-year timeframes. It is widely forecasted to continue to outperform the yellow metal in future also.

I vividly remember it was the winter of 2007. The global markets were in a state of total disarray. The subprime crisis was unfolding in the developed world.

 Last year, while discussing this subject, I mentioned, “it is a debate that will continue for many more years and no one will remain unaffected by it. Almost everyone who transacts in money or is part of the global economic system will need to deal with it at some point in time.”

I note that the debate is intensifying, widening, and deepening. Moreover, it is becoming more balanced with many conventional money managers, regulators, bankers, and administrators coming in support of digital currencies as an alternative to fiat currencies.

A few days ago, Larry Fink, the Chief Executive Officer of BlackRock, one of the most influential financial firms globally, commented in a TV interview that under the current circumstances “Crypto will play a role as flight to quality”. He was reported to have said, “Bitcoin is a hedge against the devaluation of your currency”. This comment is in total contrast to his comments in 2017 when he had emphatically condemned the idea of cryptocurrencies, saying “Crypto is an index of money laundering”.

Last month, a leading German Bank (Bank) reportedly entered into a partnership with Swiss trading firm Taurus to offer custody services for institutional clients' cryptocurrencies and tokenized assets. In 2018, Deutsche Bank's chief investment strategist Ulrich Stephan criticized crypto for being "too volatile and not regulated enough." Standard Chartered (A leading British Bank) also made a bold forecast predicting that “Bitcoin prices will climb to $100,000 by the end of 2024.”

Earlier this summer, Hong Kong’s Securities and Future Commission proposed guidelines to enable Chinese users to invest in Bitcoin and some other large-cap cryptocurrencies on registered platforms. This is in total contrast to the stance of the mainland Chinese authorities.

In the meantime, several smaller African and Latin American countries, like the Central African Republic, Uganda, Zimbabwe, El Salvadore, Paraguay, Venezuela, etc. have continued to adopt cryptocurrencies in their monetary system, some even declaring bitcoin as legal tender. Last year, even Ukraine created a ministry of digital transformation with an aim to become one of the foremost authorities on crypto. (see here)  Cryptocurrencies are now legal in many countries/regions like the EU, US, Mexico, Brazil, Israel, etc.

There are speculations that the ardent crypto hater Warren Buffet may also be having a slight change of heart in recent months. In an apparent change of traditional policy, Berkshire Hathway has invested as much as US$600 in two fintech firms - PayTM of India and StoneCo of Brazil. This has led to market speculation that the firm may change its long-held stance on digital assets including crypto.

India’s regulatory thought process on crypto has also travelled a long way in the past five years. The Reserve Bank of India started with a blanket ban on the sale or purchase of cryptocurrency for entities regulated by RBI (all scheduled commercial banks and NBFCs) in 2018. The RBI governor “equated crypto trading with gambling”. The ban was declared untenable by the Supreme Court. Presently, the legal position on dealings in crypto in India is ambiguous. It is neither explicitly unlawful nor a regulated asset. However, last week RBI governor reiterated his stance on the cryptocurrency ban, saying there has been no change in the central bank’s position.

No surprise that Bitcoin has weathered all the pessimism and sharply outperformed gold and equities in the past five years. Since October 2018, Bitcoin has gained over 400%, as compared to ~63% for gold (in USD terms) and ~47% for S&P500.

 The past 10yrs (2013-2022) have been a period of great uncertainty and turbulence for the global economy, financial system and markets which were considerably weakened by the global financial crisis in the preceding five years.

Supported by abundant liquidity and lower rates, the markets weathered Tapering 1.0; Brexit; Covid-19 pandemic; Sino-US tariff war; remarkable shift in weather patterns; handing over Afghanistan to Taliban; Russia-Ukraine war; out of control inflation; and burst of technology stock bubble rather well. The end of near zero rate regimes and monetary tightening in the past one year has however made the markets jittery.

The current generation of the market participants (investors, bankers, analysts, intermediaries, and policy makers etc.) who are in their 20s and 30s have never practically experienced persistently higher inflation and consistently rising interest rates. They might have read case studies of the 1970s and 1980s era; but that is usually not a good substitute for personal experience. No surprise that their response to the situation, in terms of strategy, has so far not been adequate.

Despite historically low rates and unprecedented liquidity, the economic growth has been dismal and returns on various asset classes are not commensurate with the risk involved. Emerging markets which are usually beneficiary of lower rates and easy liquidity conditions have struggled, in terms of growth, asset prices and price stability.

Commodities performance subdued

Commodities that are considered proxy to growth, e.g., copper and crude oil, have fared poorly over the past decade despite near zero rates and abundant liquidity. Nymex crude oil prices have yielded a negative 2.3% CAGR; while copper has growth at a CAGR of 2.5%.

During 2020 we saw a massive anomaly in crude markets when Crude Oil futures traded at a massive negative US$37/bbl price for a day. Similarly, the Russia-Ukraine war and subsequent NATO sanction on Russia, created massive uncertainty over availability of gas to major European countries, sending them on a gas hoarding spree. Natural gas prices rose over 100% within 6months of the beginning of war; only to correct 80% from the recent highs closer to 2020 Covid lows.

India has held well

In all this turbulence and mayhem Indian economy and markets have held up strong and steady. Though things have been challenging in the past six quarters; over the past decade Indian assets (Equities, INR gold, bonds and USDINR) have yielded decent returns, outperforming most emerging markets and developed market peers.

The benchmark Nifty50 yielded an 11.3% CAGR in local currency over the past 10yrs. Even in USD terms, it yielded a decent 7.7% CAGR, much better than Chinese, Japanese, and European equities. USDINR depreciated at a CAGR of 3.4% over the past decade, making it one of the most stable currencies amongst larger emerging economies.

Cryptoes emerging as popular asset class

Cryptocurrencies have emerged as a major asset class over the past one decade. The value of the top cryptocurrency, BITCOIN, has grown at a CAGR of ~75% over the past one decade. Of course, given the poor understanding, still lower acceptability and strong challenges from governments, central bankers and traditional bankers, the volatility in prices of cryptocurrencies has been extremely high. Of late we have seen gradual rise in acceptability of Bitcoins.

A number of unscrupulous and untested business models emerged in trading, custody, and/or otherwise transfer of cryptocurrencies; causing tremendous losses to the unaware and greedy investors. This may reduce over a period of time as acceptability and awareness about cryptocurrencies improves.

Trend may continue in medium term

Currently a number of developed economies are struggling with demographic challenges; massive monetary overhang; unsustainable public debt; geopolitical tensions, and leadership vacuum. On the other hand, the Indian economy is gaining strength on the back of a favorable demography; disciplined fiscal; exemplary monetary policy; a decade of massive investment in capacity building, especially in physical infrastructure and import substitution (also see Time for delivery is nearing). It is therefore likely that Indian assets may remain steady and offer decent returns over the next decade also.

 Five months ago, I had highlighted the likelihood of a trading opportunity emerging in gold. (see here) The opportunity did present itself, though not exactly in the manner I had anticipated. Nonetheless, the gold prices rallied about 19% in USD terms; from a low of USD1630/oz in early November to a high of USD1950/oz in early February.

Since peaking out in early February, the gold prices have corrected about 7% in USD terms. It would therefore be pertinent to ask what traders and investors should be doing with their gold positions.

It has been my long standing view that gold is no longer an investment asset. (for example see here and here) The view is even strengthening with each passing year. I believe that it is highly unlikely that gold will stage a comeback as a widely accepted medium of exchange (gold standard); and it will be gradually phased out as a store of value as better digital options emerge.

In this context, the latest report of the World Gold Council (WGC) presents some interesting data that needs to be noted.

Demand structure of gold demand is changing

WGC highlights some important changes in the demand structure of gold in the past three decades.

·         The consumption demand of gold has declined structurally.

·         Gold demand in paper form (ETFs etc.) has turned negative in the post Covid period.

·         Demand for gold in bar and coin form has been sustaining since the Global Financial Crisis (GFC).

·         Central Bank demand that was negative for two decades has been sustaining since GFC.

It is therefore clearly evident that the demand for gold for social security, vanity and social status purposes is on the decline structurally.

Share of India and China in global gold demand peaking

India and China had emerged as major growth drivers for global gold demand during the 1990s and 2000s. The combined share of China and India in global gold demand had increased from ~20% in 1992 to ~55% in 2008. Post GFC this share stagnated and has declined to less than 50% post Covid.

Central Banks major buyers since GFC

In the post GFC period central banks have been a major driver of the global gold demand. The banks which were net sellers of gold in the 1992-2008 period, turned net buyers of yellow metal, buying close to ~1200tonne in 2022. Apparently, the unprecedented money printing prompted the global central bankers to diversify their reserves away from USD and EUR.

The major surge in central banks’ gold buying was also driven by the demand by central Asian and East European bankers for the fear of NATO sanctions.

Now since most central bankers are pursuing a policy of quantitative tightening and inflationary expectations are well anchored in medium term; the bond yields are expected to stay higher for longer; the sanctions on Russia and allies have failed to show the desired impact; global consumers continue to remain under severe cost of living stress; demographic indicators continue to deteriorate in the developed world and showing signs of population peaking in China; there are few demand driver for gold to sustain the current prices.

The short term trading opportunity in gold is therefore over in my view. The medium and long term outlook for gold continues to remain weak.

 The year 2022 is proving to be a bad year for the global investors. The investors’ wealth erosion in the US financial markets, in the past one year, matches the losses suffered during the global financial crisis in 2008-09.

 

If we consider the top 10 global stock markets, in terms of market capitalization, eight of these markets have yielded negative returns this year (in local currency), whereas the rest two are unchanged. Given the USD strength against most currencies this year, the returns would be much worse for the global investors who participated in these markets by investing US dollars.

 

Hang Seng, the benchmark index of the Hong Kong stock market that is mostly used by the global investors to invest in Chinese companies through ‘A’ shares of these companies, has seen 33% draw down in the past one year. With this draw down the 10yr return of Hang Seng is negative 25%.

NASDAQ Composite, the benchmark index for technology stocks listed in the US, is the second largest stock market in the world with a market capitalization exceeding US$22trilions. This Index has lost over one third of its value in the past one year. European (Euronext) and Japanese (Tokyo Stock Exchange) equities have also seen a value erosion of over 10% in the past one year.

Besides stocks and bonds, other asset classes like Bitcoin (-70%); Gold (-13%) and US residential real estate (-13%) are also down materially. Even the cash positions are effectively down by 3 to 5%, given the negative rates on saving deposits.

This is however plain statistics. This may be interpreted in a variety of ways by various persons; depending upon which vista point the interpreter is viewing these data points and what colour eyeglasses they are wearing. For example—

(a)   US$100 invested by an investor in US Tech 10yrs ago is still worth US$250, despite it diminishing by one third in the past one year. But, a large number of investors who started investing (or increased their exposure significantly) during the pandemic may be sitting on material losses.

(b)   An investor in US equities who was leveraged 3x in the past one year may have lost his entire capital, regardless of when he started investing or what he earned in the past. The losses would have been worse if the investor was leveraged in US treasuries. Whereas, an investor following a strict asset allocation strategy with no leverage, may not be doing as bad, though he might have also witnessed a drawdown of ~20% in the past one year.

(c)    A handful of highly skilled traders and hedge funds might have made very good profits by taking short positions on various assets, though a large majority of investors and traders have suffered losses.

(d)   A foreign investor, e.g., Japanese or Indian, parking his money in USD deposit may have outperformed a large majority of investors; whereas a US investor investing in Asian securities might have fared much worse.

(e)    Many investors are terming this sharp fall in value across asset classes as a once in a decade opportunity; citing that historically this kind of fall has invariably been followed by sharp rallies. Whereas, there is no dearth of experts who believe that we are not even half way through the corrective phase; and asset prices will fall much more to adjust for the reversal in QE programs unleashed by the central bankers and fiscal profligacies of the governments.

 In the past one month, the bond yields in most of the developed world have risen sharply, devastating the bond portfolios, especially the leveraged portfolios. Even most emerging markets have seen their bonds declining in value. Consequently, the global currency markets have also seen high volatility. The USD index has reached the highest level in two decades, as JPY, EUR and GBP have declined to lowest levels in decades. Even PoBC is cutting the reference range for CNY sharply and USDINR is at historic lows.

The sharp rate hikes in most parts of the world, and tighter money markets have so far not been able to rein the runaway inflation. It is expected that the central banker may continue hiking aggressively for another quarter at least. Accordingly, the forecast of a severe recession in 2023 in most parts of the western world on both sides of the Atlantic is fast becoming a consensus.

Poor demand outlook due to recessionary conditions is causing severe correction in the commodities markets. Industrial metals and crude oil have corrected sharply. The shipping container rates have also collapsed. Even if we normalize the commodity prices and container rates for the Covid related abnormalities, we are heading towards prices lower than the average of 2018-19.

In all this global turmoil, the most puzzling piece is precious metals. Both gold and silver have not behaved in the expected manner. Traditionally, during periods of high inflation, geopolitical uncertainties, war, money-debasement (due to quantitative easing or hyperinflation) etc. gold and silver had provided a safe haven, protecting the wealth of investors. In the latest episode of crises, precious metals have actually belied their safe haven status.

Despite, inflation ruling at four decade high level; Russia-Ukraine war; tension in the China Sea; and massive money debasement (US Fed alone printing US$7trn in the past 30months), international gold prices have actually fallen over 10% since January 2021 in nominal USD terms. In real terms, the losses are even more. Though, in GBP and EUR terms gold prices are higher, but certainly not commensurate with the circumstances and historical trends.

The trend in gold prices becomes even more intriguing, when we factor in the requirements under Basel III regulations that may require much higher holdings of physical gold by the global central banks. In fact a number of central banks like Bundesbank, PoBC, Central Bank of Russian Federation, RBI, etc. have increased their holdings of physical gold in the past 4years.

A few months ago, I had expressed my apprehension that yellow metal might be losing its luster (see here). The recent trend further strengthens my fear that in the new global order that is emerging post the pandemic, Gold may not be a key component. Declining consumption demand (the share of gold & silver ornaments has fallen below 1% in Indian household savings, from 1.7% just 5yrs ago, see here); competition from digital currencies; higher security risk and higher cost of security; and rising cost of production etc. are some factors that seem to be working against the gold.

Nonetheless, I am inclined to believe that we may get a very good trading opportunity in gold sometime in the next twelve months. I shall look to allocate some tactical money towards gold, if it falls another 8-10%.

The latest edition of the Handbook on Indian Statistics released by the Reserve Bank of India (RBI) depicts some interesting trends in domestic savings. Gross Domestic Savings (GDS), which was recovering steadily post demonetization, has again declined post Covid. However, the decline since FY17 is entirely due to lower savings in the corporate sector. The household savings have actually risen sharply, especially during Covid.

Contrary to popular perception, the Indian households are allocating much less to the capital market products (shares and bonds) post Covid. Even contributions to the provident funds have declined materially, indicating lower employment in the organized sector. Bank deposits have seen an increase. The contribution of Indian households to Investments (Gross Capital Formation) is stable at the elevated levels seen post demonetization, implying a rising trend towards self-employment.

Key trends

·         Gross Domestic Savings (GDS) in India that had recovered from Rs48.2trn in FY17 to Rs 60trn in FY19, declined to Rs55.9trn in FY21.

·         Household’s share in GDS increased from 58% in FY17 to 79% in FY21. During Covid it increased from 65% in FY20 to 79% in FY21. At the same time the share of the private corporate sector in GDS declined from 34% in FY17 to 30.6% in FY21.

·         The share of financial assets in household’s total savings has seen an increase from 41% in FY17 to 52.5% in FY21. In the same period the share of physical assets declined from 57.2% to 46.7%; and the share of gold and silver ornaments fell from 1.7% to 0.9%.

·         Contrary to popular perception the share of allocation to capital markets (shares and debentures) fell from a high of 9% in FY17 to 3% in FY21.

·         Household share in investment has increased from 32% in FY17 to 38% in FY21.

Indications

Post demonetization and GST, the private sector profitability (hence savings) have been impacted.

Households are increasingly becoming cautious. They are controlling their consumption and adding to savings.

Employment conditions may have worsened. More households are engaging in self-employment.

Deployment of savings in physical assets like personal vehicles, housing etc. is being avoided to maintain liquidity.

Risk appetite has been impacted adversely; and households are preferring safer bank deposits over riskier capital market assets.

 Markets in 1H2022 – As tough as it could be

The first half of the current calendar 2022 was perhaps one of the toughest six month periods for the global markets. In fact, for global equities, the 20% fall in MSCI All Countries index 1H2022 during 1H2022 is the worst ever on record.

The global government bonds are also having the worst year in 150years, as the global central bankers reversed the course of monetary policy. Indian benchmark yields have risen 14.5% during 1H2022.

Energy and Food prices have risen in this period, largely due to war between Russia and Ukraine; but other commodities like industrial metals, steel, and precious metals have mostly shown a downward trend. Gold (-1.3%) is trading marginally lower while silver (-15.6%) has lost in line with industrial metals.

The new age assets like cryptocurrencies have also been decimated in the global melee. The bellwether bitcoin lost over 58% of its value during 1H2022.

USD has gained close to 10% during 1H2022, while JPY and GBP have been significant losers. INR has been a relative outperformer.

 Equity Markets in India

Indian equity markets had their share of pain during 1H2022. Though the benchmark Nifty50 fell ~9.5%, outperforming many major global markets, the pain felt by the investors was significantly deeper.

The market breadth was extremely poor. Only 35 stocks registered gains for every 100 shares declining. The smallcap Index was down ~25%. Besides, the sectors where most exuberance was seen in the past couple of years, namely, IT Services (-28%), Realty (-19%) and Metals (-16%) underperformed the benchmark index materially.

The net institutional flow to the secondary market was marginally positive, though the foreign institutional investors were major sellers (Rs2.25trn).

Anecdotally, non-institutional and household investors usually have largest exposure to the sectors that are showing highest momentum; and hence may have lost much more value than the benchmark Nifty may be indicating.

The market activity has diminished materially in 2Q202, further indicating that the non-institutional and household investors that played a major role in the secondary market in the past couple of years, might have withdrawn to the fringes.

Nifty yielded positive return in 9 out of past 10years

Notwithstanding the global problems (Grexit, Brexit, Taper Tantrum, Covid-19) or local issues (Demonetization, GST, drought, slowing growth, Covid-19), Nifty50 has yielded positive return in 9 out of 10 years (2012-2021). The negative return in 2022 (if at all) must be seen in the light of strong performance in 2020-2021.

First episode of major FPI selling in Indian equities

The foreign institutional investors were major sellers in the market. As per the final figures released by the SEBI, the Foreign Portfolio Investors (FPIs) sold INR2.25trn worth of Indian equities in the secondary market during 1H2022. The selling particularly accelerated in 2Q2022, as the war between Russia and Ukraine intensified and Fed committed to larger rate hikes. In Asia, as per the Strait Times, the foreign investors sold USD40bn worth of equity in 7 Asian markets; of which India accounted for ~USD14.5b.

In the past, FPIs have been net sellers in three out of the past 20years. In the past 10years, they were net sellers only in 2015 and 2021. However, in no case the selling was major in relation to the total market or the total FPI holding.

Nonetheless, the net institutional flows in Indian markets remained positive for 1H2022, as the domestic institutions pumped INR2.32trn into the market. There has been no instance of net negative institutional flow in the Indian markets so far.

Global markets

The global markets are arguably witnessing the worst meltdown since the global financial crisis. The pain is visible across asset classes like equities, precious metals, bonds, cryptocurrencies and industrial metals. Only energy and agri commodities have yielded positive returns.

The developed market equities led by USA and EU have been the worst performers, followed by emerging markets and Japan. Volatility has spiked sharply.

Reversal of monetary policy direction has resulted in sharp decline in bond prices, leading the yields higher. USD has accordingly strengthened.

Though inflation has been one of the top concerns, the traditional hedges like Gold and Swiss Franc have not been in demand, as has been the case historically. The decoupling of traditional hedges from inflation trajectory has substantially complicated the trading strategies. Obviously, the jitteriness and bewilderment is materially accentuated as compared to the previous episodes of global market corrections due to macroeconomic factors.