Most indices and sectors delivered positive returns in October after a bad September
Broad Market Indices: Nifty (up 5.5%) outperformed midcap (up 1.8%) and small cap indices (up 1.9%).
Performance deviation between sectors was lower this month.
After outperforming in September, FMCG under-performed this month (down 0.3%). Rural demand is slowing and that has hit consumer stocks. At the same time the input costs are rising and competition is not allowing companies to pass on these costs.
PSUs led by the PSU banks which were up 15% and the defence segment, was the best performing segment (up 8.4%), followed by Financial services (up 6.9%) – which is benefitting from improved balance sheets, lower NPAs.
IT (up 5.2%) outperformed for the first time this year after months of under-performance helped by lower valuation and rupee depreciation, but still remains big underperformer on 1Y basis.
IPO segment was the worst performer in October as well as on 1Y basis. Most old IPOs have seen price erosion (Nykaa, PayTM, Zomato, PB Fintech etc). In case of new issuances there have been good listing gains in select IPOs, but those also have not managed to hold on to the gains afterwards
Within Commodities: Most segments did well this month
August was a month of hope regarding inflation and global dynamics improvement but September was a return to reality. October 2022 has seen demand for equities on the premise that the outsourcing story (China+1, Europe+1 thesis) and eventually lower inflation should help the Indian economy in many ways.
Most global markets delivered positive returns in Oct with US/European markets outperforming Asian peers.
US: Equity Markets did well in October, The rise came in spite of the Fed confirming that tighter monetary policy is still needed to contain elevated inflation. Investors may have been focused on the earnings season which, at the half-way stage, showed around three quarters of companies having delivered better-than-expected results.
Eurozone: Europe announced new plans to tackle the energy crisis that included a first version of a price cap and a common purchases system. These measures, together with new fiscal stimulus support of €40bn, should help both households and businesses.
UK: UK assets reacted positively to Rishi Sunak being appointed leader of the Conservative Party and, by extension, becoming the country’s new prime minister. His fiscally conservative reputation and prior experience as chancellor helped to stabilise gilt yields and in turn interest rate expectations.
China, Hong Kong : Worst performing markets for the month. Congress reinforced President Xi’s authority and failed to signal any near term let-up in the zero-Covid policy. New US export controls on the semiconductor industry, which will restrict Chinese companies’ access to advanced chips, also weighed on sentiment.
Most currencies appreciated versus the dollar, as investors see slower pace of Fed hikes from December which in turn would impact USD negatively
Indian Rupee depreciated to a small extent as RBI reduced intervention in the market