Adani effect pushes Indian stocks past most world markets in ’22

(Bloomberg) — India is set to rank among the world’s best-performing major stock markets this year, outpacing concerns about higher interest rates and an economic slowdown that has bogged down peers.

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The S&P BSE Sensex index is up 3% so far in 2022, the biggest gain in the world after measures by Singapore and Indonesia. A solid earnings run propelled major Indian benchmarks to record highs, making the market bigger than the UK. Meanwhile, the MSCI All Country World Index is down 20%.

This year’s winners include stocks linked to billionaire Gautam Adani and banks boosted by a strong recovery in credit demand. Some of the biggest losers have been shares in tech companies that have languished after their public debut and outsourced software providers that have faced concerns about a potential slump in foreign demand.

The outlook, however, is darker. The market is expected to lose momentum next year due to high valuations, with Goldman Sachs Group Inc. calling it underperformers against China and South Korea.

Slowing global growth could weigh on the country’s economy in the near term even if its “structural promise” remains a significant long-term attraction, JPMorgan analyst Sanjay Mookim wrote in a note this month.

Here’s a look at some of the most significant stock movements of 2022:

Adane companies

The Adani port conglomerate has seen at least two of its seven listed companies more than double this year, led by Adani Power Ltd. which has benefited from a surge in electricity demand. Flagship Adani Enterprises Ltd. rose 113% after becoming the second group company to join the NSE Nifty 50 index. The share price of Adani Wilmar Ltd., the group’s consumer food joint venture , could gain another 24% from current levels, according to analysts’ consensus 12-month price target. Investors have sold off the group’s shares lately due to strong valuations.

Bank recovery

The S&P BSE Bankex index is up 18% this year thanks to the sector’s successful resolution of defaulted debt, the creation of a bad bank to offload troubled loans and a strong recovery in credit demand. Uday Kotak, the billionaire chief executive of Kotak Mahindra Bank Ltd., called the banks’ rebound a “Cinderella” moment. However, a worsening gap between deposit and credit growth is something to watch out for, according to Macquarie Capital analyst Suresh Ganapathy. The State Bank of India, the nation’s largest lender, is up 25% this year and could gain a similar magnitude over the next 12 months, analysts estimate.

IPO disappointment

Persistent disappointment following large initial public offerings has sent fintech firm Paytm and online insurance marketplace Policybazaar down more than 50% this year following their commercial debut in late 2021. firm Delhivery. Life Insurance Corp. of India, which surpassed Paytm to become India’s largest IPO, has lost more than a quarter of its value since May.

Software crash

Outsourcing providers were among the worst performers, due to concerns over a possible recession in the US and Europe. Major firms including Infosys Ltd. and Tata Consultancy Services Ltd. slipped, pushing the sector indicator towards its worst year since 2008. long,” said JM Financial Institutional Securities analyst Abhishek Kumar.

Cheaper generics

Drug exporters such as Aurobindo Pharma Ltd. and Divi’s Laboratories Ltd. also took a hit when generic drug prices plummeted in the United States. Sampath Reddy, chief investment officer at Bajaj Allianz Life Insurance Co., said drugmakers could focus on profitable complex generics in response to lower prices overseas.

–With the assistance of Lianting Tu.

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