New Delhi, June 18 : It’s a perfect storm in global capital markets in 2022 as all global major indices have been seeing strong headwinds, emanating from high inflation, and subsequent downside risks to economic growth.
The World Bank cut its forecast for global economic expansion in 2022 further to 2.9 per cent from 3.2 per cent and warned that above-average inflation and below-average growth lie ahead with potentially destabilising consequences for low- and middle-income economies.
It has cut India’s economic growth forecast for the current fiscal to 7.5 per cent from 8 per cent as rising inflation, supply chain disruptions and geopolitical tensions taper recovery.
Domestic benchmark equity index Sensex declined 13 per cent since the start of 2022, thereby giving a hint about the proportion of losses the market participants witnessed.
Foreign investors have pulled out over $42 billion or Rs 3.26 lakh crore from the Indian markets in the last eight months. They have been net-sellers in the Indian markets during these eight straight months.
FPIs have been selling across the board, though with some sectors seeing more pressure and some others less.
However, there were some stocks who sailed through the troubled waters and went on to accumulate hefty returns for their respective investors.
Among the BSE 500 companies, Adani Power, Mangalore Refinery and Petrochemicals (MRPL), Bharat Dynamics, GMDC, CreditAccess Grameen, GHCL, Mahindra Life, Deepak Fertiliser, Hind Aeronautics and JK Paper were the top runners, rallying 156 per cent, 117 per cent, 99 per cent, 72 per cent, 59 per cent, 63 per cent, 49 per cent, 46 per cent, and 48 per cent, respectively, data curated by Sunil Damania, Chief Investment Officer at MarketsMojo showed.
Among the recently listed companies, shares of Adani Wilmar, since its exchange debut, have never looked back, albeit a minor slump in the past few days. The shares are currently 161 per cent above its issue price.
The Adani group company is known for its wide range of offerings in edible oils besides wheat flour, rice, pulses, sugar among others.
Shares of automobile maker Hindustan Motors too steered past the current market volatility and its shares have doubled in the past 1 month period.
Damania believes that equity as an asset class will give better returns compared to any other asset classes, provided one remains invested patiently for at least a year.
“With the inflation rate in the economy and the kind of coupon rate offered on debt instruments, purchasing power of that investment will come down at the time of redemption. Hence, we believe that when compared to all other asset classes, a one-year period equity investment would be the best in terms of returns.”
Deepak Jasani, Head of Retail Research at HDFC Securities, said: “Retail investors have supported the markets since the beginning of Covid, but now on a rolling 12 months basis, Nifty is in the negative. Hence retail investors will refrain from making large new commitments in the markets except to average their holdings or to top up their equity portion in some favoured stocks.”
In a high inflation regime coupled with declining household income, it’s best to invest in B2B product companies, Suman Bannerjee, CIO at Hedonova, a US-based hedge fund that has a large interest in alternative investments.
“Defensive companies like industrials are doing really well if you look at EPS (earnings per share) growth. Stock prices are down because of global economic headwinds but that’s temporary for industrials. I also think pharma API (Active Pharmaceutical Ingredient) companies are going to do very well,” Bannerjee said.
