What is jittering global markets and why India is in the sweet spot?
Global equity markets have been multiple cups from various fronts with respect to economic data, political and geo-political tensions followed by a long war outbreak between Ukraine- Russia which is keeping the commodity and the oil market active. On the flip side, the Indian equity markets have been outperforming the global peers by a good margin in terms of the index and broader market participation.
With IMF and professional forecasters trimming their global growth forecasts, fears of a global slowdown are turning into fears of a global recession. The ongoing war and inverted bond yields are the major reasons behind the scare. Overall GDP growth is one of the statistics which the government and businesses focus on.
As global equities struggle after the Federal Reserve’s latest hawkish tone, Southeast Asia’s growth outlook is making the region an investor favourite destination in the equity markets. The benchmark MSCI Asean Index has done much better than the broader MSCI Asia Pacific Index and is set to outperform a gauge of global stocks for a third straight quarter. Most of the region’s biggest economies are expected to grow at least 5% this year, according to estimates gathered by Bloomberg, with the removal of pandemic-era restrictions offering a key boost.
In the above Asian market list, India seems to be at the top. The growing bullish sentiments to a reopening of Southeast Asia is ploughing back the domestic demand that’s making an inverse impact from a global slump. And with the tailwind from commodity exports, the region’s earnings outlook seems more promising versus most markets squeezed by slowing consumption and rising costs.
American Equity markets have been under pressure for the past few weeks amid ongoing talks of further Fed rate hikes and recession but the Indian equities have been resilient to these negative sentiments. The main reason behind the recent outperformance are below:
1. Falling crude oil prices
4. Recovery in the consumer demand
5. Flattening inflation levels
6. Dip in the global commodity prices
On the other hand, European markets are under steep pressure on the gas supply issue followed by rising inflationary rates and slowing demand. If we talk about Asian peers, most Asian countries are suffering economic crisis on many fronts where China is still under the clutches of corona crisis while countries like Sri Lanka are facing socioeconomic issues.
Overall, for the next couple of months, the equity markets will be very volatile and the economic data from the United States and Eurozone will be keenly tracked by the market participants. The next trigger for the markets will be the above-mentioned economic data followed by any negative war-related news between Ukraine-Russia or China-US may also fuel bearish sentiments in the equity markets. As far as the Indian markets are concerned, we expect any major correction due to the global meltdown may be utilized in a long-term portfolio comprising domestic-based sectors like Banking, Consumption, Cement, Real Estate, and some portion of information technology stocks.
Global markets will remain jittery for the next couple of months due to the ongoing issues but as long-term investors, we should have a proper plan to make the best use of any kind of major correction in the Indian markets and accumulate good quality stocks into the portfolio for longer-term investments.
