The average annual return of the Indian stock market is close to 20%, and the returns of IT, materials, industrial and other industries are high

  Since the beginning of this year, the Indian stock market has gone out of a market that is completely different from other emerging market economies and global stock markets. Especially since the second half of the year, while the global stock market has repeatedly fallen, the Indian stock market has bucked the trend and achieved positive returns so far, becoming a bright spot in the global market.
  Wind statistics show that as of November 30, the Mumbai SENSX Index has risen by 7.95% in 2022. This is mainly due to the relatively controllable inflation level in India, the relatively prudent monetary policy, the strong economic growth level and the improvement of corporate profitability, as well as the confidence brought by foreign investors returning to the Indian market, which makes the Indian stock market in every down cycle. Zhongjun can rebound strongly and return to its high level.
Indian stocks average annual return close to 20%
Attached table is a comparison list of the main indexes of the Indian market and other MSCI indexes

Data source: Wind

  In 2022, the performance of the Indian stock market will significantly outperform developed countries and emerging market economies. Since the beginning of this year, several waves of global stock market declines have come from the Fed’s strong interest rate hikes and subsequent concerns about market liquidity crises. Under the interest rate hike cycle of the world’s major developed countries, superimposed on the intensification of global geopolitical risks, global emerging market economies, including India, are facing greater pressure on capital outflows.
  Nine Indian stocks suffered prolonged sell-offs in October 2021-June 2022. However, with the return of foreign investors in July and the massive buying by domestic institutional investors for nearly 20 consecutive months, the Indian market has significantly outperformed the global and other emerging market economies. According to Wind statistics, as of November 30, the return rates of MSCI Global Index, MSCI Developed Markets and MSCI Emerging Markets have recorded -16.42%, -15.81%, and -21.08% respectively this year, while the MSCI India Index is only -3.45%. .
  Look at the performance of the Indian domestic market. The Indian stock market mainly has two major exchanges: Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), among which BSE is the earliest exchange in India, and NSE is currently the largest stock exchange in trading volume. Place. As of September 2022, the number of listed companies on BSE and NSE is 5,383 and 2,326 respectively, and the combined market capitalization of the two exchanges is Rs 54.16 trillion. The two main indices of the Indian stock market, Sensex and Nifty, are constructed from 30 listed companies on the BSE and 50 listed companies on the NSE respectively. According to estimates, from 1991 to 2021, the average annual rate of return of the Indian stock market reached 19.6%, significantly higher than the 10.4% of the national bond market.
  In terms of market capitalization, several important industries with the largest market capitalization in the Indian stock market include software and IT services, oil and gas, banking, and fast-moving consumer goods. Since the recovery after the sharp fall in April 2020 due to the epidemic, the companies with the highest returns are concentrated in industries such as IT, materials, industrials, utilities, healthcare and real estate.
  The latest data shows that due to the improvement in domestic consumption and investment demand in India, the overall revenue of listed companies in India has improved in the first quarter of the 2022-2023 fiscal year (April-September 2022), and the overall sales of Nifty50 and Nifty500 companies increased by 31.7% year-on-year respectively. % and 35.5%, which are new highs in the past four quarters, while the year-on-year growth rate of EBITDA is relatively smaller (11.4% and 10.4%), reflecting the impact of high input costs in the current environment .
  From the perspective of industry, the companies with the fastest year-on-year sales growth in Nifty50 are mainly concentrated in energy, public utilities, materials and other industries, while export-oriented industries such as IT and industry are significantly affected by the global economic slowdown, and their year-on-year growth rate has slowed down. .
Indian equities are now at average valuations

  It cannot be ignored that the external risks faced by the Indian stock market are the same as those of other emerging market economies: Russia-Uzbekistan conflicts, the Federal Reserve’s more-than-expected rate hike and tightening process, the European energy crisis and rising oil prices, and the hidden worries brought about by the liquidity crisis in the British government bond market.
  Looking forward, the impact of the Russia-Ukraine conflict on India is relatively limited, and the impact of the energy crisis has been greatly weakened in the near future as the situation in Europe improves. Therefore, the risks facing the Indian stock market in the future are the same as those of other emerging economies, mainly from the liquidity shock brought about by the Fed’s accelerated monetary tightening.
  In recent months, India’s stock market has remained volatile at a high level due to expectations of global central bank tightening and deepening economic recession, as well as a slight pick-up in India’s domestic inflation. A boost in valuations has played a more important role in Indian equities this year than earnings, according to key metrics.
  As of November 18, India’s MXIN Index expected the latest Forward EPS to be 84.58, which continued to fall from the high point of 98.5 in May, but was still significantly higher than the average level of previous years. The latest expected price-earnings ratio ForwardPE Ratio is 24.79, which is a significant expansion from the bottom in June. There is still a certain distance from the valuation level at the beginning of the year, and it is 0.5 standard deviations higher than the historical average of the past five years. Compared with history, the current valuation level of Indian stock market remains at the average level.
  From the perspective of profit fundamentals, the latest global Forward EPS is 82.81, which has continued to fluctuate and fall from the high point of 100 in March. The latest Forward EPS in India is 84.58. The recent decline has accelerated along with global profit expectations. The strengthening of global recession expectations has inevitably spread to India. market. The latest TTM EPS in India is 81.83, and the rolling rate of return per share is accelerating towards the expected rate of return per share. After the performance is realized, the market does not have much growth expectations for the follow-up fundamentals of the Indian stock market.
  From the perspective of capital flow, since the beginning of this year, the Federal Reserve’s monetary policy tightening has accelerated the return pressure of US dollars in emerging market economies. Although the Indian stock market has strong fundamental support, it has also experienced a large outflow of foreign capital. But on the other hand, India’s relatively strong domestic economic growth and relatively stable domestic and foreign policies mean that the Indian stock market can undertake the outflow of funds from other emerging economies, easing the pressure on the return of the US dollar. Since October, Indian stock market capital outflow pressure has slowed down, thanks in part to its absorption of capital outflows from other emerging economies.
  For foreign investors, because the Indian stock market has performed well this year, the net outflow of foreign capital since the fourth quarter of 2021 has turned into a net inflow from July 2022. Among them, the Indian stock market absorbed a net inflow of foreign capital of 512 billion rupees in August, and the bond market The net inflow of foreign capital has attracted 38.4 billion rupees, and the net inflow of foreign capital in the stock market has reached 303.9 billion rupees since November. Foreign capital is optimistic about and deploying the Indian market on a large scale. However, considering that the Indian stock market has rebounded to a high level and has fluctuated at a high level recently, and the recent rebound in Indian inflation has put pressure on the central bank to raise interest rates, the prediction of continued strength in the Indian stock market in the future requires further support from economic and market data.