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Nifty’s two-month streak of gains ends in December 2022. The index showed extreme volatility, fluctuating within a range of 1,113 points before falling 653 points, or 3.5% month-on-month, to close at 18,105. Nifty is up 4% in CY22. Over the past 12 months, large- and mid-cap stocks have each risen 4%, while small-cap stocks have fallen 14%. Over the past five years, mid/small caps have underperformed large caps by 23%/65% respectively.
Inflow of domestic institutional investors and outflow of foreign institutional investors: CY22 DII flows into equities hit a record high of $32.2 billion against CY21 inflows of $12.1 billion. With just one year of outflows from CY16, DII has invested a cumulative $80.5 billion over the last seven years.
Conversely, the FII witnessed an outflow of $17 billion after three consecutive years of inflows. Over the past seven years, FII has cumulatively invested $30.4 billion in the Indian market, with outflows in just two years.
Markets in CY22 are highly volatile and nervous, fueled by a number of global and domestic macro headwinds. However, despite these challenges, the Indian market has shown remarkable resilience, significantly outperforming the global market.
Positive trigger:
A slowdown in the pace of inflation and some sort of resolution to the Russian-Ukrainian dispute could ease the situation and ease pressure on the central bank to raise rates further.
Negative trigger:
India’s economic growth is likely to moderate in the second half of 2023, with the Reserve Bank of India forecasting 4.3% gross domestic product growth. This can adversely affect demand and, in turn, corporate profits. Strong earnings trends have been the most important driver of India’s outperformance, especially over the past three years.
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