Foreign portfolio investor (FPI) flows into India may remain tepid in 2022, said a recent note by Goldman Sachs, who now peg the foreign portfolio investment into India at $5 billion in 2022, down from their earlier forecast of $30 billion with risks skewed to the downside. "There has been $15 billion of equity outflows YTD in India already, and the IPO of the largest insurance company has been pushed out. "Additionally, with no mention of India's inclusion in global bond indices in the Union Budget, there are risks to our already conservative base case assumption of an announcement of India's likely inclusion into the GBI-EM Global Diversified Bond Index in Q4-2022," wrote Andrew Tilton, Goldman Sachs' chief Asia-Pacific economist in a co-authored report with Santanu Sengupta and Suraj Kumar.
Tata AIG, ICICI Lombard and Nippon Life have evinced interest for the profit-making insurance arm of Reliance Capital (RCap), joining several prominent financial companies from India and abroad in the race for RCap's assets. The final day to submit an expression of interest (EoI) was March 25 and the bidders will now get access to the latest information about RCap before they make financial bids.
The faster-than-expected rise in interest rates by the US Federal Reserve (US Fed) shook global financial markets in early 2022. And now the ongoing war between Russia and Ukraine has lifted commodity prices, with Brent crude oil hitting a 14-year high of $139 a barrel in intraday trade. All these developments have sent the equity markets across the world into a tailspin.
Gold prices have surged nearly 18 per cent, so far, in the calendar year 2022 (CY22) to around $2,050 per ounce against the backdrop of the ongoing Russia-Ukraine war and there is more headroom over the next few months, believe analysts at Goldman Sachs who expect the yellow metal to become costlier by another 25 per cent to $2,500 an ounce by the year-end. Goldman Sachs, earlier, had raised its 12-month gold price forecast to $2,150 per ounce considering that an impending US growth slowdown would lead to increased concerns of a US recession and incentivise 300 tonnes of inflows into gold ETFs. At the beginning of the Russia-Ukraine tensions, Goldman Sachs had suggested the resultant rally in commodities could deteriorate the developed market (DM) growth-inflation mix, increase concerns of a American recession, and push gold ETF inflows to 600 tonnes and, in turn, lift gold prices to $2,350 an ounce in 12 months.
With the international markets facing uncertainty after Russia invaded Ukraine and Western nations retaliated with sanctions, Indian companies are putting their international fundraising plans on hold as they wait for the markets to recover. Bankers said apart from the geopolitical crisis, international rates are hardening in anticipation of interest rate hikes by the US Federal Reserve to control rising prices in the US. The Ukraine situation has implications for the market. In such a situation, international investors try to shift to safe haven assets by exiting from emerging markets.
Investors and companies should brace for higher commodity prices over the next few weeks in the backdrop of Russian troops attacking Ukraine on Thursday. Meanwhile, US President Joe Biden threatened new sanctions against Russia for an act of aggression against Ukraine. All this, analysts believe, can push prices of key commodities such as crude oil, ammonia, urea, potash, and phosphates higher.
The auditor of ABG Shipyard, which is being probed by the Central Bureau of Investigation (CBI) for the Rs 23,000-crore default to banks, had settled an investigation by the Securities and Exchange Board of India (Sebi) by paying a small settlement fee in 2019. The regulator had initiated an investigation into the fund diversion from ABG Shipyard and had asked the auditor to explain why it failed to detect fund diversion in time. In his settlement application, auditor MN Ahmed, partner of Nisar & Kumar, a chartered accountant firm, said he ceased to be an Indian citizen and has retired from the profession.
Every 10 per cent rise in crude oil price will shave off around 0.2 percentage point (pp) from India's GDP growth and widen the current account by 0.3 per cent, says Nomura.
A lot of mid and small-caps are in the bubble zone and command high valuation and have corrected sharply.
With the Adani and Jindal groups and Mukesh Ambani-owned Reliance Industries joining the race to buy Videocon Industries' (VIL's) assets, lenders are expecting aggressive bids for VIL's consumer durables and overseas oil assets, which are to be sold in separate auctions. The entire asset sale exercise is expected to be completed in the next six months, said a banker. A promoter entity of Naveen Jindal-owned Jindal Steel and Power has also evinced interest in the second round of bids for VIL's consumer durable business. The deadline to submit bids for VIL's assets ended on February 2.
A hallmark of some new businesses today is that they seek to use the brute force of capital, combined with smart technology and operations, to create new needs that you didn't even know existed, the chairman of Aditya Birla group said in a blog post on the trends for the new year.
Analysts caution against volatility and recommend buying stocks of companies that are on strong fundamental footing that have been beaten down badly in the recent carnage.
Indian companies are expecting generous tax incentives from the Union Budget that will help them invest more in building capacities in the coming years. While the productivity-linked incentives (PLIs) are a good start to spur local manufacturing, the government should also take steps to boost consumer demand, which is not showing encouraging signs, say chief executive officers (CEOs) of India Inc. Statistics released by the Reserve Bank of India (RBI) shows that Indian banks had sanctioned loans worth Rs 75,558 crore in 220 new projects - a record low - in the pandemic-hit financial year ending March 2021. This is not showing any signs of a significant pick up in the last nine months of the ongoing financial year.
The group began to outperform the broader market only with the onset of the pandemic in March 2020 while earlier it was largely keeping pace with the Sensex. The group's market cap is up 164.4 per cent since the end of March 2020 against a 105 per cent rally in the Sensex.
'The markets have corrected almost 8-9 per cent from their highs, so one can accumulate quality stocks at reasonable prices.'
So which sectors are likely to do well in 2022? Should you focus on domestic economy-related sectors or export-oriented ones?
After a stellar run that saw the frontline indices - the S&P BSE Sensex and the Nifty 50 - clock gains of around 21 per cent and 24 per cent respectively in calendar year 2021 (CY21), the year gone by in real sense belonged to the mid-and small-cap segments. Thus far in CY21, the mid-and small-cap indexes on the BSE have far outpaced the run in the frontline indices and notched up a gain of around 38 per cent and 61 per cent, respectively during this period. Though analysts expect the outperformance to continue in 2022, they caution against the multiple headwinds in the year ahead that may dent the overall market sentiment.
'If the third wave of Covid infections is as bad as the second one, the market may get very polarised with a preference for blue-chips with low volatility.'
'In 2022, active management, long-short strategies, multi-asset strategies, and asset allocation strategies need to be considered to meet long-term investment goals.'
As regards India, FIIs have pumped in over Rs 34,400 crore in the Indian stocks in calendar year 2021.
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