Festival of colour turns impressive for markets; Sensex rises over 2,360 pts, Nifty up 424 pts from Holi 2022

Holi 2023: The festival of colours is considered playful and supposed to bring love and joy. In the market also, the festival has brought some cheer as Nifty, Sensex started the week upbeat. On March 6, Sensex closed at 60,224.46 up by 415.49 points or 0.69%. Nifty 50 ended at 17,711.45 higher by 117.10 points or 0.67%.

Looking at the Indian market performance since Holi 2022, both Sensex and Nifty 50 have made some notable gains.

From Holi 2022 date, Sensex has rallied a whopping 2,360.53 points, or 4.07%. On the other hand, Nifty50 has gained 424.4 points, or 2.45%. Last year, the Holi festival was celebrated on March 18. On that day, Sensex was around 57,863.93 and the Nifty 50 at 17287.05 on March 17, 2022.

The backdrop in the last three months of FY22 was crucial. The world was in the initial stages of a macroeconomic uncertainties, geopolitical tension between Russia and Ukraine, global supply-chain disruption, policy rate hike cycle, inflationary pressure, extremely volatile conditions, and much more.

The economic setup in FY23

It has been a seesaw ride for markets in FY23 so far!

Meanwhile, the first half of FY23 struggled to keep up with the risks as inflationary pressure acted as the major spoilsport pushing for monetary tightening and aggressive rate hikes from central banks globally. The second half so far has seen the global economy on a recovery stage with tailwind risks still pertaining, however, India outperformed major developing and emerging markets.

In the early days of December 2022, Sensex hit a new lifetime high of 63,583.07 and the Nifty 50 touched a historic high of 18,887.60.

But the year 2023 began on a volatile note. In its February 2023 bulletin, RBI said, “after remaining rangebound in the first half of

January 2023, domestic equity markets initially moved higher in the second half, tracking the reduction in windfall tax on crude oil. Sentiments turned negative towards the end of the month, following the unusual price movement in the stocks of a business conglomerate.”

Indian equities are still at a premium, even when investors began profit booking due to overvaluation.

According to Mark Matthews, Head Research Asia, Julius Baer data, over the last four months, India’s valuation premium versus the emerging market (EM) peers retraced sharply from a high of 120% in November 2022 to its 10-year average of 70%, as the Chinese markets bounced back over 50% during the same period.

Furthermore, Mathews points out that direct retail ownership ebbed from all-time high levels of 9.8% in March 2022 to 9.2% in December 2022 on the back of a slower increase in account openings, a falling share of retail in cash turnover, and muted market performance.

Also, domestic institutional investors’ (DIIs) ownership continues to hit record highs quarter after quarter and has increased by 160bps, from 12.1% in March 2022 to 13.7% in December 2022. Foreign institutional investors (FIIs) ownership also bounced back by 50bps, from decade lows of 18.4% in June 2022 to 18.9% in December 2022.

Since March 2022, contributions to systematic investment plans (SIPs) have risen to a record high of ₹13,856 crore in January 2023. In the month of March last year, SIP contributions were at ₹12,328 crore.

Also, the number of outstanding SIP accounts has jumped to 62.16 million between April to January 2023 compared to 52.73 million as of the March 31, 2022 fiscal.

Asset under the management of mutual fund industry has also increased to ₹39,62,405.52 crore compared to the level of ₹37,56,682.57 crore as of March 2022.

Also, in January this year, the Indian equity market completed its transition to a faster settlement mechanism with all securities in the equity segment moving to T+1 settlement.

RBI said in its bulletin, “this marks the culmination of a process that began in September 2021, making India one of the global leaders with the shortest settlement cycles that will help reduce risks associated with settlement, counterparty, and operations and also have a positive impact on trading volumes.”

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