With festival season nearing, investors in India will closely monitor the impact of inflation and front-loading of rate hikes by the RBI on domestic demand, according to the report by Bank of Baroda.
In the coming days, global markets will react to incoming data from the US, Europe and China to assess the impact of consistent rate hikes by major central banks. Energy crisis in Europe and increasing bills of utilities, food, beverages in the UK will affect consumption demand in the area, thus increasing the risk of recession. China's looming property crisis will add to global woes.
The Indian equity markets have performed better so far this year compared to other major global equity markets because of sustained improvement in economic growth, the report said.
The other factor for the performance was inflows of foreign portfolio investors (FPI) in Indian equity market. In India, FPIs (equity) have also seen a turnaround in the last two months (Jul-Aug) with inflows at $6.8 billion, compared to outflow of $28.6 billion between January and June.
As per the report, Sensex (Nifty also mirrors the trend) and FTSE have largely outperformed in CY22 so far. Compared to December 2021, Sensex and Nifty were up by 2.3 per cent in August, and FTSE was up by 2.8 per cent. On the other hand, Dow Jones (-7 per cent), S&P500 (-10.7 per cent), Nikkei (-0.5 per cent) and Hang Seng (-15.3 per cent) are all considerably down compared to last year.
This is because the US remains concerned regarding growth slowdown and Fed's aggressive monetary policy stance.