What is jittering the global markets and why is India in a sweet spot?
Global equity markets have been multiple hiccups on various fronts with respect to economic data and political and geopolitical tensions, followed by a long war outbreak between Ukraine and Russia, which is keeping the commodity and oil markets active. On the flip side, the Indian equity markets have been outperforming their global peers by good margins in terms of the index and broader market participation.
With the 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’s favorite 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 by 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 for the reopening of Southeast Asia are plowing back the domestic demand that’s seeing 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 a recession, but Indian equities have been resilient to these negative sentiments. The main reason behind the recent outperformance is below:
- Falling crude oil prices
- Better macro numbers.
- Stable auto sales.
- Recovery in consumer demand
- Flattening inflation levels.
- There is a dip in 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 their Asian peers, most Asian countries are suffering from economic crises on many fronts. While China is still under the clutches of the corona crisis, countries like Sri Lanka are facing socio-economic 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 market participants. The next trigger for the markets will be the above-mentioned economic data, followed by any negative war-related news between Ukraine and Russia or China and the US, which 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 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 long-term investments.