It was a turbulent year for markets around the world falling stock market Unlike 2021 wiped out trillions of dollars of investment when there was a significant rally in the markets.
After the stock market crash in March 2020, central banks adopted liberal policy stance Which made it easier for investors and businesses to borrow. Lower interest rates along with stimulus packages announced by governments and easing of restrictions related to COVID-19 propelled the indices to record highs in 2021.
But in 2022, especially after Russia’s invasion of Ukraine, supply chains broke down, causing a jump in commodity prices. This created inflationary pressures. As central banks raised benchmark rates to curb inflation, markets responded with a sharp correction. As a result, financial markets in both emerging and developed economies end the year in the red. Some exceptions include Brazil, a commodity-exporting country, and India, where domestic institutional investors (DIIs) have played a significant role in balancing foreign investor outflows. Table 1 Shows the annual change in the closing price on December 27 in major markets. Only the markets of Brazil, India and Singapore show marginal gains of more than 2% year to date.
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While India’s markets outperformed the major indices, the year-to-date returns from the BSE Sensex were the lowest in the last six years ( chart 2, In contrast, in 2020 and 2021, when FPIs were net buyers, the benchmark index returned 15%. Chart 2 shows the closing price of BSE Sensex and the annual change in closing price of the last 10 years.
The first half of 2022 saw heavy selling by foreign portfolio investors, who pulled out $16.25 billion. In the wake of rising interest rates, FPIs resorted to massive selling in emerging market economies and rushed to safe-haven assets. In India, this flight of capital was offset by increased DII participation, aided by strong inflows from retail investors and systematic investment schemes. chart 3 Shows investments (in ₹ billion) by Foreign Institutional Investors (FIIs) and DIIs through the NSE in the Cash Market segment. In calendar year 2022, FIIs sold equities worth ₹3,054 billion in the cash market, while DIIs bought equities worth ₹2,382 billion.
There has been a significant jump in new investor accounts since 2020 to ride the bull wave. Year 2021 to witness phenomenal growth in retail participation due to higher adoption of mobile and digital investment platforms, rising interest in IPOs, spread of investment culture in Tier-3 and Tier-4 cities and prominence of equity as an asset class (SEBI) Went. report good). Nearly 30 million new investor accounts were added by NSDL (National Securities Depository Ltd.) (blue bar) and CDSL (Central Depository Services Ltd.) (red bar); About 26 million new accounts are expected to be added in 2022 ( chart 4,
Retail participation picked up after the crash in 2020 and has been strong over the past three years. Retail investors remained net sellers for 11 years till 2020 when they became net buyers ( chart 5, This trend picked up in 2021 as their net inflows reached ₹1,405 billion. In 2022, inflows by retail investors are expected to exceed ₹800 billion. Chart 5 shows the net inflows (₹ billion) by retail investors in the cash market segment of NSE.
There has also been a good inflow through SIP, the preferred route for retail investors. Income through SIP route registered a sharp rise in 2021 and it continues this year as well. chart 6 Shows monthly SIP contribution in ₹ crore.
Source: NSE, SEBI, BSE, AMFI
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