In the past two years, the world’s central banks have printed $ 9 trillion, which is the most money ever printed by the world’s central banks in a specified amount of time.
Bombay Stock Exchange archive photo. PTI
In our opinion, CY 2022 will be a year of consolidation for Global Markets with all the gains made over the past two years. This global stock market rally was fueled by the US Fed, with an accommodating monetary policy COVID-19[female[feminine .
Over the past two years, global central banks have printed $ 9 trillion, the highest amount ever printed by global central banks in any given period. By 2021, global commodity markets had a dream job COVID-19[female[feminine due to excess liquidity created by global central banks and some disruption in supply from China, which created inflationary pressures in global economies. In addition, the US government has committed $ 2 trillion for infrastructure development, which has sparked optimism in the global commodities market in 2021.
Now, in early 2022, the US Fed has decided to slow the pace of money printing and also systematically raise the interest rate over the next two years, which could bring this excess liquidity under control. It can also impact foamy valuations in global stock markets, unless corporate earnings actually catch up with those valuations. Additionally, increasing the interest rate may lower the multiple of PE for global equities.
If we are talking specifically about the Indian markets, over the past three years BSE Sensex has given a 17% CAGR at the index level, but individual stocks have delivered a 20% to 300% return on investment. This is a great return on investment in the wider market across the world. In our opinion, India is “the Stock Exchange of the World” because it has the largest number of listed companies in the world, more than 5,200 listed companies, which represents 14% of the total listed companies in the world. It gives investors such a wide choice to invest in all sectors of the Indian economy. Additionally, when we talk to our global investors, they see India as the âboyâ of the world with favorable demographics as well as a vibrant democratic organization. Over the past three years, the return on investment for Indian investors had been excellent, but it may now see a temporal correction as well as price corrections in some of the sectors, whose valuation appears to be well ahead of theirs. fundamentals.
For Indian markets in 2021, IT sectors had been the main sector of the stock market with a 200% return on investment at broader index levels, where individual stocks had given a return on investment of up to 500%. from March 2020 lows. This sector will continue to outperform broader markets as the world moves towards digitalization. Other outperforming sectors in 2021 were metals, chemicals, and manufacturing and retail. These sectors could experience a temporal correction in 2022, as some of the undervalued sectors could lead the rally for New Years 2022.
For CY 2022, we believe banking, automotive, healthcare and infrastructure could lead the pack for a larger market. We also believe that there is a value investment opportunity in the selected PSU space, which offers a very high dividend yield at the current valuation. There is a higher chance that we will see more PSU candidates for the divestment list, once we have LIC IPO in CY 2022.
For cautious investors, we suggest moving their portfolio of mutual funds from debt to gold with each drop in gold prices. Over the past ten years, Debt Mutual Funds have outperformed Gold Investments, but over the next ten years, with 2030 in mind, Gold is expected to outperform Debt Mutual Funds. .
I wish all investors a very happy, safe and prosperous 2022.
The author is the Chief Strategist – Global Asset Classes at Ashika Group. Opinions expressed are personal
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