By Siddhant Mishra and Joydeep Ghosh
With the Sensex and Nifty slipping slightly over 0.4% on Friday, the Indian stock market indices closed in the red on the last trading day of 2022. But it did quite well in a year when all major indices fared badly due to the Russia-Ukraine war, rising inflation & interest rates and the resurgence of Covid fears in China.
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Investor wealth rose 6.15% or Rs 16.36 trillion. However, in dollar terms, it was down 4.53% (index fell 5.92% in dollar terms) as the rupee fell 10.18% against the dollar in 2022 – the highest since 2013. However, except Singapore’s Strait Times and Brazil’s Bovespa, which gave returns of 10.13% and 4.68% respectively in dollar terms, all the other major markets indices are in the red this calendar year.
Leading global indices such as S&P 500, Hang Seng, Shanghai Composite and DAX were down over 10% in 2022, with S&P 500 falling as much as 19.44%.
Nilesh Shah, MD, Kotak Mutual Fund, said: “Between 1991 and 2021 our GDP and market cap grew ~ 10 times. Our markets have done exceptionally well in CY 22 as our economy appeared like an oasis in the global desert. Higher earnings growth and premium valuation have helped India buck the trend and chart an independent path in CY22.”
However, while the investor wealth did rise in 2022, it was much lower than in the two preceding years. In CY21 and CY20, investor wealth rose by a whopping Rs 78 trillion and Rs 32 trillion, respectively. In addition, in a year when the average consumer price index stood at 6.79% till November, equity investors’ returns were negative in real terms.
“Other than gold, all asset classes have failed to beat inflation. CY22 is an exceptional year where debt and equity delivered below par returns. Withdrawal of liquidity, rise in interest rates and higher inflation impacted real returns in CY22. A disciplined asset allocation will help beat inflation in the next year,” added Shah. Gold prices at MCX were at Rs 54,369/10gm – up 13.51% year-to-date.
Ambareesh Baliga, an independent market consultant, said: “After a sluggish first half due to rate hikes and global factors, the performance picked up in the second. While India outperformed the rest of the markets, it was disappointing compared to the past two years.
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According to him, stocks that did well in 2020 and 2021 didn’t do well in 2022, and vice versa. That is, stocks like PSU banking, which had a rough ride in the past two years, did well.
The rise in the market was aided by the power, bankex and energy indices which jumped 18.51%-27.69% while the IT, healthcare and consumer durable were down 11%-23%.
The top gainers in Sensex were ITC, Mahindra & Mahindra, NTPC, IndusInd and Axis Bank which rose between 38%-60%. In the Nifty 50, Adani Enterprises was up 125% while Coal India (70%), ITC (60%), Mahindra & Mahindra (51%) and NTPC (41%) were the other top gainers.
During the year, foreign institutional investors sold shares worth Rs 1.23 trillion while domestic institutional investors bought equities worth Rs 2.73 trillion.
Going forward, there are expectations that the first half of the next calendar year could be tough, but things are expected to improve in the second half.
“I see a few headwinds for 2023, primarily around the Covid scare in China, the slowdown in the US and Europe, and the Fed’s hawkish stance. The bearish sentiment is bound to affect India too. So, I don’t see earnings springing a big surprise. In the second half, there could be a revival and markets will do well. Consequently, earnings will also improve,” said Baliga.