Will 2022 be a year of consolidation for global markets?

Will 2022 be a year of consolidation for global markets?

Will 2022 be a year of consolidation for global markets?

In our view, CY 2022 is going to be a year of consolidation for Global Markets with all the gains accomplished in the last two years. This global stock market rally had been fueled by US Fed, with easy monetary policy post Covid-19.

In the last two years, Global Central banks had printed $9 trillion, which is the most money ever printed by Global Central banks in a specified time span. In 2021, globally commodity markets had seen a dream run post covid-19 era due to excess liquidity created by Global central banks and some supply disruptions from China, which has created inflationary pressure in World Economies. Also, the US Government has committed $2 trillion for infrastructure development which has created optimism in the Global Commodity Market in 2021.

Now at the beginning of 2022, US Fed has decided to taper the pace of money printing and also systematically raise the interest rate in the next two years, which may put this excess liquidity under check. It can also impact the frothy valuations of global stock markets unless corporate earnings really catch up with these valuations. Moreover, increasing the rate of interest may contract the PE multiple for Global equities.

If we talk specifically about Indian Markets, then in the last three years, BSE Sensex has given a CAGR of 17% at index level, however individual stocks have generated an ROI of 20% to 300%. This is an excellent ROI at broader market level across the globe. In our view, India is “The Stock market for the world” as it has the highest number of listed companies in the World, i.e. 5200+ listed Companies which accounts for 14% of total listed companies in the World. It gives such a wide choice to Investors to invest across all sectors of the Indian Economy. Also, when we speak to our Global Investors, then they see India as the “Young Boy” of the world with favorable demographics along with vibrant democratic set up. In the past three years, ROI for Indian Investors had been excellent but now it may witness some time correction along with price corrections in some of the sectors, whose valuation looks way ahead of their fundamentals.

For Indian Markets in 2021, IT sectors had been the leading sector of stock market with 200% ROI at broader index levels, where Individual stocks had given ROI up to 500% since March 2020 lows. This sector will continue to outperform broader markets as the world is moving towards digitalization. Other outperforming sectors in 2021 had been Metals, Chemicals, and Manufacturing & Retailing. These sectors may see some time correction in 2022, as some of the undervalued sectors may lead the rally for New Year 2022.

For CY 2022, we believe Banking, Automobile, Healthcare & Infrastructure sector may lead the pack for broader market. We also feel value investing opportunity in selected PSU space, which offers very high dividend yield at current valuation. There are higher chances that we may see more PSU candidates for divestment list, once we have LIC IPO in CY 2022.

For conservative Investors, we suggest moving their debt mutual funds portfolio to Gold at every downfall of Gold prices. In the last ten years debt mutual funds has outperformed Gold Investments, but in the next ten years, keeping year 2030 in mind, Gold is expected to outperform debt mutual funds.

Wish all investors a very happy, safe & prosperous New Year 2022.

The writer is the Chief Strategist - Global Asset Classes at Ashika Group. Views expressed are personal

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