Share markets: Learning from the past

New covid-19 versions in china, us inflation, high oil prices, geopolitical tensions, —all these and more have impacted investor sentiment, with the sensex and nifty declining nine percent within the first six months of 2022.

However rather if pulling back, this can be a time to build up deeply undervalued stocks. A steep market correction regularly offers right potential for appreciation. How markets replied to periods of low growth in the past could provide crucial instructions for future.

Fiscal 2002-03

The economy slowed down sharply in fiscal 2002-03. However the stock market exited calendar year 2002 with gains. The sensex rose 3.5 percent to reach 3377.28. Those gains endured into 2003, with the sensex zooming 73 percent to reach 5838.96. In truth may additionally-june 2003 become a trough from which the indices kept rising.

Despite growth decelerating, traders remained positive approximately the financial system posting healthy increase within the subsequent financial year. Investor sentiment changed into also supported with the aid of expectancies of solid income reports from huge agencies, which had taken cost-cutting measures during the slump.

While FIIs’ interest in India was limited in this period, and fiscal deficit was high at 5.28 per cent of GDP in FY03, domestic investors were quite bullish on the economy.

Fiscal 2008-09

Towards the backdrop of the global financial crisis, india’s gdp increase fell sharply from 9 percent in the preceding fiscal year. Within the first quarters of 2008-09, the financial system grew at 7.8 percent and 7.7 in percent, respectively after which declined to 5.8 percent in the 1/3 and fourth quarters.

There has been a steep correction within the stock marketplace, with the sensex slumping to 9328 in 2009.

However, this marketplace contraction turned into quick lived, with markets gaining 17 percent through 2010 and sensex closed the year above the 20,000 mark.

Though india suffered the downside of the subprime disaster in a roundabout way (current account deficit to gdp ratio fell to -2.33 percent, import cover fell to 9.8 months, economic deficit rose to 5.84 percent and fiis pulled out ₹52,987 crore) india’s gdp held up well at 7.7 percent in cy08. This changed into proof of the economy’s resilience and recognising this fiis returned in cy09 investing a net sum of ₹83,431 crore.

Fiscal 2020-21

This was the year when covid-19 put breaks on the global economy. Amid big lockdowns, the indian financial system shrunk via an unparalleled 7.3 percent in fiscal 2020-21. However stock markets posted their maximum annual gains seeing that 2017, with sensex and nifty 50 gaining round 16 percent in 2020.

Foreign investors continued to be bullish on India with foreign investment to GDP ratio at 3.01 and FII inflows at ₹1,70,262 crore in CY20. Import cover also remained high at 17.4 months. But fiscal deficit worsened to 8.89 per cent due to higher public spending.