CHART OF THE WEEK 📈
In May 2022, the Indian markets have fallen 8% and then partly recovered losses. While it’s naturally spooked investors, performance of the Indian markets has been far better than global indices.
Only the British and Brazilian markets have been up this year so far. Brazil has been seeing benefits from the rise in commodity prices. The country is important in the global standpoint from a metals and food perspective. Rising prices, triggered by the Russia-Ukraine crisis have been hence benefitting Brazil.
The most hit has been the US market. With inflation near 40-year highs, and the Fed going aggressive on rate hikes and potential balance sheet offloading, there is concern over the cooling down of the economy. Even the once-bullet-proof tech stocks have now started showing cracks.
The Indian markets in that context are relatively better off. Some factors that make India more resilient to these shocks are:
The rise in inflation for India has been majorly contributed to by the war, and not by underlying factors like a tight employment market like in the US.
Indian consumers are shielded from a lot of the inflationary factors that impact other countries. Subsidies on food, fertilisers and power ensure impact of the global food, coal and gas shortages are minimal on consumers.
Although FIIs have been pulling money out, inflow from domestic investors has been keeping the liquidity situation afloat.
Fiscal policy in India is expansionary. Even if monetary policy were to reverse, support from fiscal policy would support growth in the economy.