2022 brought in Two thing, first one not so good, Omicron led third Covid wave in India, Secondly, quiet pleasantly it also brought back the sulked FII (foreign Institutional Investors) who have been selling out of Indian markets since April 2021. First 3 Trading days of 2022 saw FII buying back and it’s the reason that Markets have risen over 3%.
2021 will be remembered for India’s landmark development of COVID vaccination and its unprecedented drive to inoculate its 130 Crore+ population.
- Global equity markets attained new all-time highs driven by strong corporate earnings growth even in the face of Covid-related restrictions, supply chain disruptions, rising oil prices, and higher labour costs.
- India, on the other hand, has just come out of the second covid wave and is catching up with the rest of the world. India’s economy is recovering quickly as evidenced by strong macro data – better-than-expected GDP growth, manufacturing consistently in expansion zone, improved core sector growth, GST collections above Rs 1 lakh cr. for sixth consecutive month, narrowing of fiscal deficit and falling unemployment rate.
- India seems to be in a relatively better position even when compared to other markets like the US. US, GDP growth has peaked out and is likely to slow down, inflation is very high, interest rates are all-time lows and are likely to move higher, and corporate profit-to-GDP is close to all-time highs and likely to start moderating,
- India: Economic recovery has just started, inflation is under control, interest rates are likely to be in a moderate range, and corporate-profits-to-GDP is at all-time low and should move higher. Corporate earnings are likely to grow at a 15% CAGR over the next three years, which is higher than the long-term average.
Global Markets Performance.
- Political uncertainty led to one of the worst performance from Brazilian markets.
- Developed Markets did fairly well with US S&P 500 & France delivering 26% & 28% respectively, way above 22% of NIFTY.
- Chinese Markets remained subdued, clocking Just 5% in CY 2022.
- India Stood best amongst Emerging Markets.
Winner Keep rotating their Bets:
- Small caps ruled the road to Recovery from March 2020 lows, clocking 30% & 58% in CY 20 & 21 Respectively. Investors need to be cautious with them now.
- Mid & Large caps had good time for 2 consecutive years.
- International Equities will continue to be good source of diversification.
- 2020 was party time for Debt funds. Yields tanked and even G-sec delivered 12% returns, Tough time in 2021 for Debt funds.
- Gold/ Real Estate can be the comeback kids in 2022, Rise of Cryptos can be attributed as the reason for apathy towards Gold.
What happened last year, may not be repeated this year.
- Technology was the best performer amongst the dependable sectors. Pharma sector had a good time till Covid Played in H1 of 2021.
- Banking & Financial sectors saw massive correction towards last quarter of the year as the markets went on a corrective spin.
- Auto, Infra, chemicals, Real Estate should be the best bets for 2022.
- Consumption should be a good defensive play in 2022.
What is in Store?
Year 2003-2007: The Bull Market: 5 Years – 450%+ Returns. A 40% CAGR Growth.
- Current bull market is reminiscent of 2003-2008 bull Market. Especially given a fresh earning cycle, markets expected to soar to newer highs.
- Select sectors will see earnings shift and will continue to do good. Like Technology.
- Inflation will remain a big global issue with reduced liquidity flows. US is witnessing highest inflation in decades. It will keep US Fed at work to keep a check on liquidity.
- Strong economic recovery: Nomura India Business Resumption Index is now higher by nearly 18 points since the pre-pandemic levels.
- In FY21, we saw India’s GDP contract by a record 7.3%, but Nifty EPS grew by a healthy 18%, Despite the second wave in India, the earnings for FY22 and FY23 have not seen any significant downgrades and are anticipated to grow by ~25% and ~20% respectively. Still need to have moderate expectation as we will be entering 2022 on High base effect.
Making Money in CY 2022 will not be as easy as it has been in last 2 years?
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Disclaimer: These are our personal views and doesn’t constitute any investment advice. Please speak with your investment advisor before making any investment decisions. We are AMFI certified Mutual Fund Distributors.