Samvat 2079: In a macro-driven stock market, domestic-market bet proves a good armour

Revival of consumption in urban and rural markets, following a good monsoon, helped improve consumption. (Photo by DEV ROY: Pexels)

Stocks in sectors with higher exposure to the domestic markets fared much better than those in sectors vulnerable to global headwinds, this past one year.

Also read: Samvat 2079: Diwali special page on Indian stock markets, and for tips from experts 

Indian stock markets, like their peers across the world, experienced high volatility over the past one year because of various factors—elevated inflation, aggressive rate hikes, geopolitical tension and energy-supply disruption. Performance of sectoral indices varied depending on their vulnerability to these stressors. Outperforming sectors even protected benchmark indices from a harder fall.

In a rising-interest-rate environment, bank stocks rallied and helped support Nifty, BSE 200 and NSE 500. In such an environment, banks tend to do well because they pass on interest rate hikes to their borrowers quickly but pass on the rate hikes to their depositors with a lag. So, in the beginning of a rate-hiking cycle, these stocks tend to do well.

In BSE 200, the outperformance of the power sector was led by Adani stocks including Adani Power and Adani Transmission.

Nifty CPSE has been the biggest gainer since Diwali by rising 14 percent while Nifty Realty was the top loser by falling 24 percent.

The optimism around the first was driven by government’s divestment plans and the pessimism around the second was led by rate hikes, which made housing more expensive.

Also read: Pan India rental demand rises 29% this year, says report

Revival of consumption in urban and rural markets, following a good monsoon, and softening of raw material prices saw Nifty FMCG gaining 11%. Besides the shortage in semiconductors easing, a healthy growth in consumption and fall in input costs also drove Nifty Auto to rise by 7%. The auto sector also rallied on the positive sentiment around electric vehicle (EV) adoption, which seems to be accelerating with rising fuel prices.

Nifty Energy too rose 7% as refining margins surged and reopening after the pandemic caused a sudden spike in demand for power.

IT stocks stumbled over the fear of recession in the US, one of their largest markets, and the energy crisis in Europe. Nifty IT fell by 21% over the last year.