It was a year of underperformance. Share prices tumbled across the board from the United States to Asia in 2022. As central bankers worldwide hiked borrowing rates, fears about an imminent recession loom. Regarding monetary policy, central bankers are watched closely like celebrities. There is an effort to second-guess things they would do in their next meeting.
In a speech, Michael Debabrata Das, the deputy governor of the Reserve Bank of India, urged everyone to allow humour into monetary policy conversations to mitigate the stress associated with the decision-making on interest rates. That central bankers are resorting to humour to keep themselves fit amidst surging inflation is a revelation this year.
Investing in 2022 was like a rodeo. If you know to hang on, you win.
Know about India’s Resilience
It was a year of non-performance for stock markets. While share prices across America, Europe and Asia tumbled 20-30%, Indian equities stayed put. Benchmark indices in India are among the top performers in 2022 without really doing much. The S&P BSE Sensex is up merely 5.6%. However, it stands out amidst a drop of over 15% in the US S&P 500 and over 20% in China, Korea and Taiwan. The Indian resilience was despite an over $20 bn pull out by foreign portfolio investors. It rode on the back of solid monthly inflows by domestic institutional investors. The Nifty and the Sensex are near a record high despite mixed growth in company profits from the quarter to September 2022. FPIs invested nearly $3.5bn in the first two weeks of November 2022, according to the stock exchange data. Domestic consumption stocks led the resilience in India. Public sector banking shares surged in 2022 and are poised to do better in 2023 due to cleaner balance sheets and better interest income. The non-food credit growth in India is over 15% helping them maintain healthy margins.
How China + 1 creates opportunities
If you look at opportunities for investing, you need to look for businesses that would benefit from a shift from China to India or any other Asian country. The conversation consolidated in the year around China +1 strategy for large corporations. Such companies will likely become critical facilities only over the next few years. That opens up an opportunity to invest in them early. You may want to identify companies that can capitalise on the new business.
Importance of diversification
No matter the attractiveness of the sector today, things can change. The year taught us a huge lesson about investing around hype. The listing of new age companies like One97 Communication, the owner of Paytm payment service, Zomato, FSN E-commerce, Nykaa, and PB Fintech all lost more than half of the market value. The lesson is that share prices need a clear view of profits. Investing for growth is fraught with risks and is not for the short term. The good idea is to diversify your assets into businesses that optimize the value and growth interplay. Alphaniti is here to ensure your goal of wealth creation is met with our newly launched Alphamind. Go on and check them out at www.alphaniti.com now.
References:
FPIs pour ₹28,888 crore into equities in the first fortnight of November | Business Insider India
https://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1340#F16
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