Indian shares were at the mercy of foreign portfolio investors (FPI) who pulled out more than Rs 2.15 lakh crore between January-June 2022 period as the central banks aggressively increased interest rate to tame the rising inflationary worries.
Benchmark indices- BSE Sensex and Nifty50- dropped 10 per cent each during the given period. Among the indices gauged to second rung stocks, BSE midcap index dropped 13 per cent, whereas smallcap index plunged 16 per cent.
Indian stock markets are still expensive on an aggregate basis in spite of the higher growth that India is witnessing versus other emerging markets, according to Vishal Vij, Founder & Managing Partner, Nestegg Wealth.
“Countries across the world are now targeting inflation by raising interest rates to counter inflationary pressures,” he said. “It is par for the course for stock markets to drop after a steep rise. Markets tend to overextend on both sides,” he added.
The pain in newly listed companies was more intense. BSE IPO index plunged 29 per cent, thanks to poor performance of new age companies and insurance behemoth
Vijay Singhania, Chairman, TradeSmart said that poor listing gains and performance of most of the new age companies has dented the sentiments. “The poor performance of LIC post its listing also put pressure on primary markets,” he said.
Among the sectoral indices, as many as four S&P BSE sectors have wiped out more than one-fifth of their value in just six months. BSE IT index has plunged about 28 per cent, followed by a 23 per cent decline in BSE Consumer Durable Index.
Indian IT companies saw margin contraction due to supply-side headwinds. The industry has been facing high attrition rates as demand for digital talent continues to outpace supply, according to Devarsh Vakil, Deputy Head, Retail Research, HDFC Securities.
BSE Tech Index is down by 22 per cent, whereas the BSE Realty index has fallen 20 per cent in the 2022 so far. Other sectors such as metal (19 per cent down), healthcare (18 per cent down) and telecom (14 per cent down) were also under pressure.
“We believe that equity market returns in India would be moderate this year with a preference to the large-cap segment as compared to the small & mid-cap space,” said Reshma Banda, Head-Equity & Executive VP, Bajaj Allianz Life Insurance.
However, a few sectors have emerged as outperformers, even in a weak market. BSE Power index has gained more than 17 per cent, whereas BSE Utilities index has jumped 15 per cent in the first half of the ongoing calendar year.
BSE Auto index surged 7 per cent, followed by a 6 per cent rise in the energy index. BSE Oil and Gas index is up by 3 per cent on a year to date basis, the data suggests.
Abhishek Jadon, smallcase manager, Vice President, Windmill Capital said that auto sector outperformed on the back of easing of semiconductor chip shortage and pent up demand which pushed up the sales.
The global demand for energy, sparked by the rally in the crude oil prices, amid the war crisis between Russia and Ukraine, has benefited the related sectors and this has trickled down to domestic players, he added.