Indian markets have been very volatile in recent times following weakness in global peers on the back of the escalating Russia-Ukraine tensions leading to a surge in crude oil prices and rising US inflation.
Concerns of an aggressive rate hike by the US Fed on the back of rising inflation and hike in US treasury yields also kept the markets on their toes. Further, a weakening rupee led to massive outflows by foreign investors. FPIs sold Indian equities worth ₹14,935 just in the first half of February.
Both Sensex and Nifty have lost over 9 percent each from their respective 52-week highs hit in October 2021.
"The element of uncertainty is very high. If the Ukraine crisis aggravates into conflict it can inflict damage to the market in the short run. The consequences of severe sanctions on Russia in the event of a Russian invasion can be debilitating for the Russian economy. This may restrain Putin from misadventure in Ukraine. Long-term investors who can ignore the present short-term gyrations can buy high-quality financials and IT stocks now," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
On the Nifty50 index, all 50 constituents declined from their respective 52-week highs. 17 stocks fell over 20 percent from their 52-week highs while the remaining lost between 4-20 percent each.
| Stock | Last Traded Price (Rs) | 52-week high (Rs) | 52-week high date | % decline from 52-week high |
|---|---|---|---|---|
| Nifty 50 | 16,842.80 | 18,604.45 | October 19, 2021 | 9.4% |
| BPCL | 358.15 | 503.00 | September 14, 2021 | 28.8% |
| HDFC LIfe | 555.25 | 775.65 | September 2, 2021 | 28.41% |
| Hero Moto | 2,657.60 | 3,629.05 | February 18, 2021 | 26.77% |
| Wipro | 548.30 | 739.85 | October 14, 2021 | 25.89% |
| IndusInd Bank | 927.55 | 1,242.00 | October 28, 2021 | 25.32% |
| Shree Cement | 23,968.75 | 32,050.00 | April 9, 2021 | 25.21% |
| Dr Reddy's | 4,220.00 | 5.614.60 | July 7, 2021 | 24.84% |
| Tata Steel | 1,165.35 | 1,534.60 | August 16, 2021 | 24.06% |
| HDFC | 2,301.10 | 3,021.10 | November 15, 2021 | 23.83% |
| Tech Mahindra | 1,401.50 | 1,838.00 | December 30, 2021 | 23.75% |
OMC BPCL fell the most, down nearly 29 percent in the Nifty50 index from its 52-week high of ₹503, hit on September 14, 2021. It was followed by HDFC Life, Hero Moto, Wipro, IndusInd Bank and Shree Cement which all fell over 25 percent each from their respective 52-week highs.
As per Axis Securities, the equity market may not deliver stellar returns in the next year as it had delivered in 2021.
READ: Asset allocation amid volatility: Here's what to do with your equity, gold, debt investments
"2022 is likely to be a year of balance sheet strength, driven by significant improvement in corporate profitability. With current valuations offering limited scope for further expansion, an increase in corporate earnings will primarily drive the market returns moving forward," Axis Securities stated in a recent report.
Asset allocation and sector rotation will be the keys to generating outperformance in 2022, it added. While exposure to equities should not be reduced, focusing on ‘quality’, bringing down portfolio risk through specific sectors, and recalibrating stocks to the initial target allocation should be a key strategy going forward, the brokerage advised.
