Performance
of Indian Stock Market since the year 2020 with Outlook for 2023
Equity
markets have faced credible challenges since the year 2022 due to Covid,
geo-political strife, high inflation, and sequential rise in interest rates.
In
March 2020, due to the COVID-19 pandemic and the subsequent lockdowns, the
Indian stock market experienced an epic fall where the BSE Sensex index
nosedived from around 41,000 to around 26,000 in a matter of few weeks.
However,
the market recovered gradually and the Sensex crossed the 50,000 mark for the
first time in January 2021. The rising trend continued with the Sensex hitting
its all-time high of 63583.07 in September 2021.
It’s
been said that, ‘in the Stock Market - be brave when others are coward, and be
coward when others are brave’. With that logic, those who invested in the
equity market when the Sensex fell to the level of 26000, and stayed put till
the Sensex breached 60000 points; would have surely gained tremendously.
However,
since September 2021, the market has been volatile with the Sensex fluctuating
between 55,000 and 60,000, on account of – the fear of Covid return, the chances of
intensifying Russia -Ukraine war (which would be completing 1-year), the weakness
of Rupee, global supply chain challenges, and the staggering inflation.
The
year 2022 had been marred by a series of challenging phenomena including
inflation, successive rise in Interest Rates; resulting in massive sell-off by
FPIs in favor of investing in safe fixed-income securities, headwinds in
China both on account of the country’s zero Covid-tolerance policy and
political tension with Taiwan—all of which have led to tighter financial
conditions and weakened economic activity across the world.
The year
2023:
Macroeconomic
indicators like direct tax collection, consumer price-based inflation,
industrial index, GST mop-up, and core sector are strong in comparison to
developed economies and emerging markets.
At
the same time, the headwinds Indian investors need to watch in 2023 are - the
expanding trade deficit, the persistent outflow of foreign institutional
investors, the weakening of Indian currency, and the drying up of liquidity.
However, thanks to huge domestic consumption, backed by the quantum of retail
participation (total Demat accounts are 10.6 Cr) Indian markets would be more
resilient to the challenges in play.
The
majority of the experts think consumer sentiment will see an uptick in 2023 and
the Indian stock markets performance would be better in the sectors like
banking, automobiles, real estate, and company stocks with strong fundamentals.
Contributions
to mutual fund schemes through systematic investment plans (SIPs) remain
unfazed by the market volatility in 2022 with inflow growing to ₹1.5 lakh
crore in 2022, a surge of 31 percent from a year earlier, due to higher retail
participation. Therefore, the way forward for passive Retail Investors should
be to invest 50% of their investible surplus in the equity market through
systematic investment plans (SIPs) of mutual funds, with a horizon of 3-5 years
in mind.
The
balance 50% of investors’ portfolio should be built through investing in Fixed
Income Securities viz. Company Fixed Deposits, Bonds, and NCDs, which are
offering very attractive returns in the rising interest rates scenario.
However, care must be taken to invest only in AAA-rated instruments.
Ajit Singh
Founder
Quick Turtle | Graded Financial
Services | AskCred.
Management Consultant | Trainer
