It has been a very volatile month for equities again. The gains of first two weeks were completely eroded in the second half.
Large caps and small caps outperformed (were almost flat for the month). Nifty Next 50 (-2.6%) and Midcap 150 (-1.1%) both underperformed.
Power (+13%) and PSU (+10.8%) were the best performing segments.
IPOs (-10%) was the worst performing segment, followed by IT and Pharma (both negative ~8%).
Financials (+7%) outperformed after many months of underperformance.
Autos (+6.4%) – like last month outperformed again.
Capital goods continued to outperform.
Overall a weak month for global equities, many markets delivered negative returns. Higher inflation, Central Banks withdrawing covid related additional support and tensions in eastern Europe are main reasons for increased volatility.
Reports suggest that globally high PE stocks that benefited due to covid related spending changes have been most impacted and financials + energy sectors outperformed. It was the largest monthly outperformance for value stocks versus growth in more than 20 years.
US: Amongst the most Impacted markets. US Fed announced the end of bond buying program by March 2022 and start of interest rate hikes soon thereafter. S&P 500 outperformed, Smallcaps were worst performing and Nasdaq 100 underperformed.
European equities relatively outperformed but most of them delivered small negative returns.
UK: Outperformed as index has higher exposure to outperforming financials and commodity stocks and less exposure to technology.
Brazil: Best performing market (+7%) – strong commodity prices and successful oil auction which got big foreign investments are key positives.
India: After underperforming global peers for 3 months, markets delivered average performance. FII outflows intensified in the January second half.
China: Underperformed again (concerns of slowing economic growth and changing regulations) – worst performing market over last 12 months now.
Most currencies weakened versus the USD as US Fed turned hawkish.
Commodity currencies (NZD, AUD) weakened much more – clear risk off signals.
South African Rand: Amongst the best performing EM currencies. Positives for the currency include interest rate hike and relatively attractive valuation versus peers.