Performance of Indian Stock Market since the year 2020 with Outlook for 2023

 

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.

 

Author

Ajit Singh

Founder

Quick Turtle | Graded Financial Services | AskCred.

Management Consultant | Trainer