Even though domestic equities ended in the red on the last trading day of 2022, the start of the new year is likely to be on an optimistic note as the long-term story of India versus its global peers remains promising.
The expectation of a positive start for equities is also backed by the historical performance of the benchmark Sensex on the first trading day of a year in the last 22 years.
The Sensex has ended positively in 16 of the last 22 years on the first trading day of the year, according to Ace Equity.
For 4 consecutive years between 2019 and 2022, the Sensex ended positive on the first trading day.
In terms of gains, the Sensex has gained the most on the first trading day in 2009, after the Great Recession. The index gained 2.7% on the first trading day in 2009.
The second best gains clocked by the 30-stock index was in 2022 with a 1.6% rise on the first trading day.
On a year-on-year basis, 2022 boded well for India as it was the second-best performer. The optimism over domestic growth prospects overshadowed the global macroeconomic headwinds and helped Indian equities be an outlier.
The Nifty 50 and Sensex gained 4.3% and 4.4%, respectively, last year. On the contrary, key indices in the US, Europe, China, Hong Kong, Taiwan, South Korea, and Russia have tumbled 9-39% in the said period.
What should investors do?
Market experts hold a bullish view on domestic equities but do see some volatility as investors will closely watch how the COVID situation in China unfolds.
Historically, January month in India has been positive, as investors buy stocks in anticipation of major reforms and allocations to growth sectors in the Union Budget.
This time around too, analysts expect momentum to catch up this month but added that global developments will also be closely monitored.
“Volatility is likely to remain high amid the rise of COVID cases worldwide and the ongoing Russia-Ukraine crisis,” said Pravesh Gour, senior technical analyst at
.
In the near future, the incumbent government’s last budget before the 2024 election, corporate earnings, and the monthly automobile sales numbers will be the key events that the market will be looking for in January, Gour said.
Most analysts are recommending investing in domestic growth-oriented sectors in the run-up to the Budget.
Domestic-oriented themes such as banks, domestic industrials, FMCG, auto, hospitals, and discretionary consumption have outperformed the cyclical and export-oriented sectors since the bottom of June 2022. Axis Securities believes this trend is likely to continue in the upcoming quarters.
(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 the Economic Times)
