iconiifl-logo-icon 1
IIFL

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

  • Open Demat with exclusive Advice & Services
  • Get a dedicated Relationship Manager to help you grow your wealth
  • Exclusive advisory on 20+ trading & wealth-based investment options
  • One tap Investments, Automated trading & much more
  • Minimum 1 lakh margin required
sidebar image

Which sectors moved equity markets in Fiscal Year 2021-22?

4 Apr 2022 , 10:57 AM

As we come to the close of another fiscal year, it is time to look at a longer perspective. How did the markets perform overall for fiscal year FY22? Which sectors outperformed and what were the sectors that underperformed. Here are some quick takeaways from the sectoral return numbers.

All the significant sectors gave positive returns in the fiscal year FY22. Of course, there were some favourites and some laggards, but overall there was not a single major sector giving negative returns for the year. The Nifty itself gave positive returns of 18.88% for FY22, but the mid cap index at 20.85% and the small cap index at 28.63% did still better.

The big story of FY22 was the relentless FPI selling since October 2021. For the full fiscal year FY22, the FPI selling stood at Rs140,000cr. However, that is only part of the story. Had it not been for the strong IPO inflows, the actual picture of equity selling in the secondary markets would have been a lot worse.

FY22 sustained the recovery, but it was about resilience too

FY21 had seen one of the sharpest rallies from the lows of the pandemic. It was expected that the markets would give low to stable returns in FY22. However, Nifty returns at 18.88% was flattering, especially coming after a solid FY21. But the big story of FY22 was about how the market overcame the headwinds on multiple fronts.

a) Oil prices were a major headwind for the Indian markets. With Brent crude prices rallying all the way to $130/bbl, the spectre of a surge in inflation was real. The problem gets compounded for India as nearly 85% of daily oil needs are met through imports.

b) Relentless FPI selling was the other big story of FY22. The total FPI selling stood at Rs140,000cr for the full year and actually was much higher in the secondary markets. Fortunately, the domestic inflows and a huge retail equity push saved the blushes.

c) One of the big stories of FY22 was the Fed hawkishness. The Fed has raised rates by 25 bps and promises another 6 rounds of rate hikes in this year. RBI is yet to follow suit, but it remains to be seen how the US Fed reacts to the inversion of the yield curve.

d) Inflation at over 6% in India and at over 7% in the US was a clear sign of supply chain constraints. Indian industries like FMCG, automobiles and chemicals saw a sharp surge in costs amidst rising commodity inflation and resultant compression of operating margins.

e) Towards the last quarter of FY22, the geopolitical situation deteriorated into a full-fledged war between Russia and Ukraine. It opens a number of possibilities from impact of sanctions on Russia to the implications of Russia shifting to gold standard and the implications for oil prices globally.

f) Finally, the spectre of COVID-19 appears to be waning and the Indian economy is all set to return to pre-COVID normalcy. However, there have been some disconcerting signals from China of a relapse of COVID and the likelihood of stringent lockdowns.

Many sectors outperformed the Nifty in FY22

Data Source: NSE

Out of the 10 sectors evaluated for FY22, all sectors gave positive returns for the fiscal year. A total of 6 sectors outperformed the Nifty while the other 4 sectors underperformed the Nifty. Among indices, both the mid-cap and small cap indices did better than the Nifty showing that alpha via stock picking was still the preferred investment mode.

Metal sector was the big star of the year yielding 61.51% returns. Through the year, the metal sector gained from a sharp spike in commodity prices worldwide. The prices of aluminium, copper and zinc rallied through the year and these companies were the top beneficiaries. Towards the end of the fiscal year, the Russia Ukraine war created concerns that the sanctions on Russia and the port embargos on the Black sea would hamper the flow of Russian and Ukrainian metals into the global market. This pushed up prices further.

Among the other 2 sectors that did better than Nifty; were IT sector with 40.46% returns and the real estate sector with 38.73% returns. IT stocks largely benefited from two factors. Firstly, the digital shift in the last couple of years had given a boost to IT spending by global companies. Secondly, Fed hawkishness hinted at a sustained strengthening of the US dollar and that was also evident in the Dollar Index (DXY). Apart from IT, real estate sector gained from a sharp spike in home registrations and aggressive residential demand amidst historically lowest rates on home loans.

Among the other sectors that did better than the Nifty, albeit to a lesser extent, were oil & gas, consumer durables and PSU banks. Upstream oil companies were the big gainers on the back of a sharp surge in crude prices. While consumer durables were seen as defensive bets, PSU banking was a case of the worst being over. Most investors saw value in PSU banks at lower levels, considering that the peak of the NPA problem was behind them.

Private banks, FMCGs and autos had a tough time in FY22

Private banks were the one sector that saw aggressive selling by FPIs in the second half of the year. That was hardly surprising considering that private banks were the biggest exposure of FPIs and they are also liquid. There were concerns on private banks if the RBI decided to hike rates aggressively to keep pace with the Fed.

For FMCG and Auto, there were two common problems. The first problem was a slowdown in rural sales and the other was margin compression due to a sharp spike in the cost of inputs. Both sectors tried to pass on cost hikes, but it was feasible only up to a point.

But the big story of FY22 was that of market evincing resilience. It was a tough market in terms of macro data, FPI flows and the geopolitical situation. Amidst all these headwinds, the Indian markets stood tall and robust. That is the big takeaway for FY22!

Related Tags

  • covid-19
  • equity market
  • Fed hawkishness
  • fiscal year FY22
  • FPI selling
  • inflation
  • nifty
sidebar mobile

BLOGS AND PERSONAL FINANCE

Images
29 Mar 2024   |   10:14 AM
Images
28 Mar 2024   |   03:36 PM
Images
28 Mar 2024   |   03:01 PM
Images
28 Mar 2024   |   01:21 PM
Read More

Invest Right News

26 Mar 2024   |   02:39 PM
26 Mar 2024   |   02:31 PM
26 Mar 2024   |   02:26 PM
Read More
Knowledge Centerplus
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Knowledge Centerplus

Follow us on

facebooktwitterrssyoutubeinstagramlinkedin

2024, IIFL Securities Ltd. All Rights Reserved

ATTENTION INVESTORS
  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

RISK DISCLOSURE ON DERIVATIVES
  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

plus
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.