It has been a volatile month for domestic equities again. Indices were up 3% – 6% in the first two weeks, most of these gains were wiped out in the 3rd week and regained again in the 4th week.
All market cap based indices delivered positive returns. Small-Caps outperformed and large-Caps underperformed.
No clear performance trend between defensive and high beta sectors.
Overall, IT has been the best performing index (+10.1%).
Amongst defensives, FMCG underperformed and Pharma marginally outperformed.
Metals had a comeback month and outperformed after 4 months of underperformance.
Capital Goods continue to outperform.
Financials and PSUs are amongst the worst performers (marginally negative). IPOs underperformed significantly (-6.9%).
GLOBAL MARKETS
SUMMARY:
Equity:
The emergence of the highly infectious Omicron variant led to a spike in equity market volatility since November, but markets quickly recovered as data from South Africa and the UK indicated a lower risk of severe disease.
Overall a good month for global equities, most markets delivered positive returns.
US: Continues to be amongst the better performing markets. Nasdaq and Small caps underperformed S&P 500.
India: Underperformed global peers for third month in a row – FII outflows continued in the secondary markets but quantum of selling reduced.
Europe: Were amongst the most impacted in the last 2 months (Omicron spread), recovered strongly in December.
Honk Kong / China: Given the concerns of slowing economic growth, both markets have been underperforming peers for a few months now.
Russia: Equities & Ruble both have been under pressure since 2 months now. There has been increased geopolitical pressure since October as Western nations expressed concerns about Russia’s military build-up near neighboring Ukraine.
Currencies:
December’s currency movements versus the USD were mixed – no clear risk on / off signals. Lot of country specific movements.
Australian Dollar strengthened versus USD as macro data reports were much better than expected.
Mexican Peso strengthened versus USD as the central bank raised interest rates more than market expectations.
The yen has been underperforming as the Bank of Japan’s dovish policy increasingly diverged from peers, who have signaled normalization from pandemic stimulus.
