The Indian stock market has plunged 9 per cent in the first half of 2022, leaving investors worried about the future of their portfolios amid highly volatile global indices. While Sensex has lost 8.96 per cent, Nifty is down 9.01 percent since the beginning of this year.
The market was heading toward its all-time highs in the middle of January but the Russian attack on Ukraine took the steam out of the rally.
Sensex, which closed at 61,308 on January 17, 2022, is down 13 per cent till date. Similarly, Nifty has lost 13 per cent from January 17 closing of 18,308. Russia attacked Ukraine on February 24. The war-initiated correction in the global markets which analysts said were already highly overvalued.
However, market recovered a majority of losses by the beginning of April led by value buying but expectations of interest rate hikes by US Federal Reserve and the resurgence of Covid-19 cases in the Western nations erased all gains made in the Indian market.
Sensex recovered to 60,611 and Nifty closed at 18,053 on April 4.
On October 19, 2021, Sensex hit an all-time high of 62,245 and Nifty scaled a record high of 18,604.
Sensex and Nifty have declined 14.85 per cent and 15.23 per cent, respectively from their record highs to date.
With the US Federal Reserve raising rates to tame record inflation, global markets have weakened on worries that the move could add to the economic slowdown, affecting nations still recovering from the effects of COVID-19 pandemic.
India too has seen investors pulling money out of equities on inflation concerns and profit-booking.
In the beginning of 2022, brokerages and analysts predicted that Sensex and Nifty were likely to reach 70,000 and 21,000 by the end of this year. However, investors are now attempting to minimise losses in their portfolios and waiting for an end to correction and volatility in the market.
Business Today online spoke to experts on the directions the stock market is likely to take and here’s what they said.
Manoj Dalmia, founder, and director, Proficient Equities
"Market has fallen due to many reasons like profit booking, overvaluation of companies, geopolitical tensions around the world, inflation concerns and hiking of interest rates in different countries. The near-term outlook for Nifty and Sensex is on the downside. Nifty is currently retracing and if further selling continues, Nifty can go down to 14,500 levels. But now it might fill the gap and reverse from around 16,170.
Sensex is also in the same situation. The downside can be till 47,000 in case of closing below 50,979 levels. There can be a period of consolidation and volatility in the near term due to uncertain global macro scenarios. Investors can buy at dips instead of hoping and timing the markets."
Ravi Singh, Vice President and head of Research, Share India
"The aggressive rate hikes by Fed and RBI to curb the soaring inflation has induced fear of potential plunging the economy into recession. The increase in US rates also led to substantial FIIs outflow from Indian markets. This led to a panic selling in the equity market triggering the stop losses. Weakness in equity, geopolitical tensions, negative sentiments in the market across the globe, elevated commodity prices, disrupted supply chains, the outflow of FIIs, persistently high inflation, and a weaker rupee have dampened the confidence of investors and increased the market volatility. With this momentum, Nifty and Sensex may continue the sell-off and touch the levels of 14,800 and 50,000 respectively in the coming trading sessions. Investors must wait for entering any fresh positions and watch for the sentiments to turn around. Existing investors may wait for lower levels to average their positions."
Arijit Malakar, Head of Research - Retail, Ashika Group
"Rising interest rates in the US made dollar strong against the emerging market currencies which resulted in massive flight of foreign money from emerging market equities. RBI also acted in tandem with Federal Reserve and raised the domestic interest rates which make the loan costlier and hurt the demand in interest rate sensitive sectors. At this current juncture, it is hard to gauge the peak of the inflation as the war between Russia and Ukraine is still going on, impeding the supply chain across the globe. Hence, the inflation headwind is here to stay and Federal reserve will continue its aggressive stance on interest rate front at any cost and market will remain volatile. Investors should adopt cautious approach before investing and should invest in those companies having strong fundamentals, good business moat and strong industry tailwinds As the fear of recession risk in US is looming over equity markets and relentless selling from foreign investors, Indian markets are expected to remain weak in near term."
Yash Gupta, Equity Research Analyst, Angel One
"The fall in the market is attributable to the aggressive monetary tightening by the global central banks which impacts equity valuations. Emerging markets like India, as result, are feeling the effects of outflows. Given the inflation issues, we believe that the interest hikes by the Fed will continue over the near term which will impact the performance of Indian Equities. However, India's inflation situation and growth outlook differ from that of the US, and we believe that the Indian corporates will continue to do well over the next few years. Hence it would be advisable to follow a systematic investment approach owing to the difficulty in timing the market."
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today