Little did the bulls know about the surprise party the bears were planning for themselves.
Bears entered the market roaring and knocked down the bulls so badly that the losses clocked by domestic equities were the worst in 9 years in the history of their performance in December.
In December, the Sensex and Nifty 50 net lost 3.5%, and this is the biggest fall seen in the month since 2014. The indices have corrected more than 4% from their lifetime highs.
The party spoiler for equities was yet again COVID. The staggering increase in the number of cases and deaths in China resurfaced concerns over its spread to the neighbouring countries and the subsequent impact on mobility and business activities.
This put a brake on the northward movement of equities and saw foreign institutional investors reducing the pace of buying shares.
In December, FIIs net bought Indian equities worth just $263 million, compared with the over $4 billion worth of purchases done in November.
The losses for Indian equities would have been higher if not for the inflows from domestic institutional investors (DII). DIIs were actively purchasing stocks in a bid to prop up their assets under management (AUM) by the year-end.
DIIs net bought equities worth more than Rs 11,000 crore in December, way higher than around Rs 1,700 crore in November.
Stocks and sectors
24 out of the 30 stocks on Sensex ended in the red in December. The worst hit was
with a nearly 12% cut.
China is the biggest market for Tata Motors’ luxury car manufacturing subsidiary Jaguar Land Rover. A slowdown in the country raises risks of a hit to car sales for the automaker. Moreover, Europe and the US are witnessing a slowdown in economic growth which further dampens earnings growth outlook for the luxury carmaker. Shares of
, , , ,
and fell more than 6-7% in December.
Among sectors, information technology, power, and utilities were the worst hit last month. The S&P BSE IT, Power, and Utilities indices fell 6-7%.
Among the BSE sectoral indices, the metal index was the only outlier with nearly 3% gains. Much of these gains came in last week, as easing of COVID curbs in China raised hopes of an improvement in business activity and demand for commodities.
China is the largest producer and consumer of major base metals. A hit in consumption in the country dampens outlook for prices of commodities.
Outlook
Even though December turned out to be a bad month for domestic equities, India remains one of the best markets when compared to the global peers. In 2022, Sensex and Nifty 50 net gained over 4%, whereas most emerging and developed markets have given double-digit negative returns.
Therefore, market experts remain bullish on the near-term performance of Indian equities and see value buying as a major theme playing out in 2023.
“We believe that value buying is the theme of 2023, with a focus on domestically oriented sectors and buying on dips. Fair valuation, steady earnings, and a robust demand scenario will be the cutting parameters,” said Vinod Nair, head of research at
.
(Data inputs from Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
