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As asset class leadership continues to evolve through different market cycles, stocks have been the best performing asset class in 2021. Nifty up 24%, mid caps up 46% and small caps by 59% while gold prices contracted by 4%. in 2021.
2022, however, was a year of transition characterized by liquidity inversion, policy tightening, geopolitical concerns and a rising inflation scenario, which led to higher commodity prices in the first half of the year. year.
On an encouraging note, the second half of 2022 should see a moderation in commodity prices and some softening in inflation expectations as well.
The volatility, however, is likely to continue for quite some time before ending in a more concrete direction. The direction of bond yields, oil prices, the dollar index, the interest rate hike by the US Fed and the intensity of inflation will further determine market fundamentals for the second half of 2022 .
Given these developments, equity market returns should be limited and bottom-up stock ideas and domestically focused themes should gain traction in the coming months.
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