Global Stocks: When Global Stocks are in Bear Market, Can Nifty Be Far behind?

Amid fears that the Federal Reserve’s fight against inflation could plunge the US economy into a recession, not just american stock But also the MSCI ACWI index, which includes stocks from both emerging and developed markets, officially slipped into bear territory this week. The S&P 500 is down more than 21 percent from its record high and the tech-heavy Nasdaq is down 33 percent from its high.

Back home, the headline index Nifty 50 is down nearly 15 per cent from its all-time high of 18,604.45 on October 19. Are Indian stocks also going to follow Mother Market US?

A drop of 20 percent from the peak is considered bear territory. For niftyA fall below the threshold of 14,883 would mark that zone.

VK Vijayakumar, Chief Investment Strategist, said that while markets globally are highly integrated, the largest market, the US, sets the trend and others follow.

“Markets have not yet discounted a full-blown US recession and its impact on corporate earnings. Therefore, a bearish trend may persist until inflation peaks and then shows signs of decline,” he said. Told.

Another Dalal Street veteran Vikas Khemani, Founder, Carnelian Capital Advisors, said India is in a very different position this time compared to the last Fed cycle.

“When the Fed last introduced interest rates, our current account deficit was 4 percent of GDP and our domestic flows were not as strong as it is today. India’s structural development story is one of the best in the world. I don’t think there is any other market that offers such a growth story,” he said, adding that he feels there is no reason for the massive deepening of the sell-off.

Mahesh Nandurkar, MD and Head of Research, Jefferies India said that India has indeed been a relatively big outperformer. “But I think the news flow and the markets are still going to be weak,” he said, adding that the Indian market would give zero returns in the next 12 months.

Though domestic inflows have been strong, FPIs have sold Indian equities worth Rs 1,91,000 crore so far this year.

Nandurkar, however, points out that foreign investors have sold only 5 per cent of their stake in India out of total FII investments of over $600 billion. “I wouldn’t be surprised if FPI sales continue, but if we see some signs of a slowdown in domestic inflows, it would be a matter of concern,” he said.

Vijayakumar says that FPIs are not selling in India because they are negative on India. “India is one of the few EM markets where they are sitting on good returns and valuations in India are still much higher than their EM counterparts.”

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