Equities – A year of consolidation
The Indian equities
consolidated the gains made during 2021 and are ending the year 2022 with
marginal gains; unlike other major global markets which gave up most of the
gains made during the year 2021. Considering the global economic, geopolitical
and financial conditions this is a remarkable performance.
- The benchmark Nifty50 and Nifty Midcap 100 are ending the year with ~5% gain; though Nifty Small 100 has lost 2022YTD 11%. The market breadth has been marginally negative; and volumes below average.
- Nifty has now given positive returns in 9 out of the previous 10 years; with 2022 being the seventh consecutive year of positive return.
- Nifty averaged 17240 YTD2022, 8% higher than the average of previous year. This implies much better returns for the SIP investors.
- For long term buy and hold investors, five year rolling CAGR in 2022 is ~11.6%, which is close to 2016-2022 average. Five year absolute Nifty return in 2022 is ~73%, also close to 2016-2022 average.
- July 2022 was the best month of the year for markets. In July Nifty gained 8.7%; the aggregate return for the rest of 11 months is -3.7%.
- Smallcap stocks underperformed the benchmark Nifty for YTD2022; however on a 3yr basis, midcap and smallcap are still outperforming the benchmark materially. The newly introduced category of Multicap funds is the best performer YTD2022; while on 3, 5 and 10 yr basis smallcap funds are outperforming.
- Foreign investors have been net sellers in the Indian equities (secondary market) to the tune of Rs 1.46trn; while the domestic institutions were net buyers of Rs2.63trn; resulting in a net positive institutional flow of Rs1.17trn during YTD2022. Contrary to popular perception, the Nifty movement led the institutional flows and vice versa was not true.
- Sector wise, PSU banks (+71%) were clear leaders, outperforming all other sectors by large margin. Consumers, Auto, Energy and Metals were other notable outperformers. IT Services, Pharma and Realty have been notable underperformers YTD2022.
- Nifty Bank (+22%) has been a clear leader.
- Presently, technically Nifty is placed in neutral territory, close to 50 EDMA with RSI close to comfortable 44 and short term momentum indicators in buy zone.
Debt and Currency –
USDINR weakens, yield curve higher and flatter
- USDINR (-6.1%) weakened YTD2022; while EURINR (+2.6%); JPYINR (+9.6%) were stronger.
- The Indian yield curve shifted sharply higher; though Indian bonds performed much better than their developed economy peers. RBI hiked the policy repo rate by 225bps during the year. However, the most notable feature of the Indian debt market was withdrawal of excess liquidity and consequent sharp rise in overnight and short term rates.
