March 2022 was a seesaw on global markets. The first week was marred by previous issues of high inflation and the Russia-Ukraine conflict. This drove the Nifty lower by 6%. And then hopes of a ceasefire and some cooling seen in global commodity prices, eased inflationary pressures - despite the 9 petrol and diesel price hikes in India. The markets then saw a sharp rebound of 10%, more than covering up initial losses, and ending 4% higher.
The markets in March 2022
Stocks: While large caps were up 4% during the month, mid and small caps saw a sharper rise, increasing by 5% and 6% respectively.
Debt: Debt markets were stable. While government bonds didn't quite move at all, there was some premium seen on corporate bonds and one-day rates.
Gold: With the run for safety, gold had been performing very well in February 2022. However, some gains were pared, as risky assets were back in vogue.
International stocks: Despite the Fed hiking rates, Nasdaq was up 6% in March 2022. The key reason was the fact that Fed was positive on growth and employment despite the rate hike.
Why did the markets rise in March?
There have been two underlying stress points that have been impacting the markets - the Russia-Ukraine conflict, and inflation. Both of these are deeply interlinked, since the conflict results in supply chain disruptions and sanctions, causing a shortage of key commodities, and a further fuelling of inflation.
However, 3 things led to a slight relief on inflation fears:
Russia and Ukraine claiming progress on peace talks
A lockdown in Shanghai because of COVID, resulting in lower demand
The US saying it will release 1 million barrels of oil per day from its reserves to curb prices
From the Indian perspective, there were price hikes across the board through the month. But the RBI continues to believe this is transient. And rightly so, given some normalisation of prices globally, India buying Russian crude at a discount and the fact that India’s job market isn’t as tight as the US.
For more on this: https://www.rupeeting.com/post/tensions-easing
Rupeeting in March
During the month our Core Portfolios, which are all-weather portfolios made of 5 different asset classes, performed very well - they all outperformed all their respective benchmarks.
Some of our decisions in the last rebalance helped us gain this advantage:
We had the maximum possible exposure to equities
We added corporate bonds to the portfolio, which gave us a better yield
We maintained exposure to Gold, which performed well
We maintained exposure to International Stocks, which performed well
Rupeeting’s Equity Portfolios too outperformed the Nifty - a couple of them, materially! Monopolies and Disruptors were both up a staggering 12% this month. Value Migration too performed well, beating the Nifty by 2%. This has been a function of:
Superior stock selection
Holding on to under-performers through tough times
A mid-quarter rebalance in Disruptors which helped vastly. Take for example Xpro India - this stock has been up 46% in March
Being in-line with ongoing trends and being aligned with factors
A couple of portfolios didn’t do that well - although they were positive for the month. Reasons for underperformance on those:
Rocketship: Some consumption stocks like Jubilant hurt
Bread & Butter: Poor performance of consumption stocks
What next for the markets?
Hopes of Russia-Ukraine tensions easing are high - despite little progress being made. Just yesterday Russia accused Ukraine of an airstrike on its soil.
Sanctions on Russia won’t ease global inflation. Europe can’t find an alternate for 40% of its gas needs - it is in no position to pull this off. The US has been releasing its oil reserves to the tune of 1 million barrels per day. But its consumption is close to 50 million barrels per day. Prices will hardly ease because of this.
Inflation is getting real in India with price hikes everywhere. Demand may slow down and corporate profits may take a hit.
Market recovery may take a bit of a breather as impact hits. The RBI has been pro-growth and calls inflation transient. And rightly so given the global and domestic situation. However, near-term pressures can't be ruled out.