The month of March saw the peak of hostilities between Russia and Ukraine. However, surprisingly most global markets recovered sharply from the initial jitters and logged in good gains for the month. Indian markets too recovered with NIFTY 50 index reporting a 4.0% gain. Broader markets represented by S&P BSE Midcap and S&P BSE 250 SmallCap, were up 3.2% & 6.1% respectively. Almost all major global equity markets are higher than where they were just before the Russian intrusion into Ukraine.
Despite multiple headwinds, FY22 has ended with decent returns of over 18.9% for NIFTY 50, with the broader markets doing better. Multiple challenges have been met with optimism as investors look forward to a period of good economic and corporate profit growth. Rising inflation and ensuing increasing interest rates come across as the biggest macro-economic factors to track. However, our view on crude oil is quite benign, with prices more likely to be $60-70/barrel by June/July 2022. (our note of Feb 2022 Views on the Current Events). Hopefully, reduction in the intensity in the Russia/Ukraine region will also lead to softening of other commodities and allay the fear of inflation meaningfully.
In the immediate near-term, some companies and sectors will surely face margin pressures. However, demand scenario continues to be very strong, as the country opens up to normalcy after two years of Covid related lockdowns. Agri produce and prices have been very good this year and this makes us believe that the Indian rural economy will witness strong growth over the next year. The China +1 strategy is only getting stronger with India reporting an export of over $400bn for the first time ever in FY22.
However, the importance of a stable democracy could not have been more pronounced as in the recent past, with China and Russia giving global investors big shocks. Our view is that it is a matter of time before global investors become net buyers of Indian equities. Domestic investors look like continuing with their confidence in Indian markets and that also bodes well for the performance in the new financial year