Year in, year out | Value Research 2022 was a great year as it showed how deeply resilient Indian businesses, markets, and investors are
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Year in, year out

2022 was a great year as it showed how deeply resilient Indian businesses, markets, and investors are

Year in, year out

Thirteen years ago, at the height of the global financial crisis, I started an edit in our magazine 'Mutual Fund Insight' with the sentence, 'The huge amount of money that the US government is bringing into the world is a problem, and this is something that is being recognised more and more widely.' The edit went on to discuss that this loose money policy - of vast amounts of money at effectively zero interest rates would inflate global asset prices and fuel speculation in stock and property markets.

Rather boldly, I pointed to evidence that seemed to suggest that this crazy free money policy might continue for as long as 18 months to two years, meaning it should have been over by 2011. This seemed to be a common opinion at the time. How deluded we all were - as it turned out, the American Free Money Festival lasted till 2022 and is only now winding down. What's worse is that where everyone thought that free money was the big problem, but eventually, the end of free money turned out to be a bigger problem. It's like when someone gets used to taking a drug, then the withdrawal symptoms might be worse than the drug itself. Anyhow, the long-predicted end of the party is not well and truly here, the bill has to be paid.

On top of this reversal of the tide of money, we have had no end of disruptive events over the last three years. 2022 has been particularly strange. When the year began, it looked like COVID had finally wound down, and it would be a year of consolidation and rebuilding. Instead, we got a war in Europe at the beginning and a new twist in the Chinese COVID story at the end. Just yesterday, I saw the headline, "Milan Reports 50% of Passengers on China Flights Have Covid." Northern Italy importing COVID from China? Looks like Season 3 of this serial is starting from the same plot point as Season 1 did!

On top of that, there was a huge distraction from the crypto fakery, whereby a complete make-believe and worthless thing started being considered an actual asset class into which people could invest. Luckily, the continuous stream of scams has made most people realise that criminality is the only thing crypto is good for. No less a distraction has been the countless profitless 'new age' businesses, especially the ones that are now listed. However, as the global liquidity party winds down, these are also getting a sharp reality check.

And yet, despite all this, against all problems and global trends and indications, we're doing fine in India. Not only do the Indian economy and markets have displayed a deep resilience, but there's also every indication that they will continue to do so in 2023 as well. In fact, it's not just that the headline indexes and the mainstream stocks have been immune to the contagion around the world; even formerly downtrodden areas like small-cap and tech stocks are now looking up.

It's hard - and pointless - to predict, but the continuation of these macro-scale troubles will mean lower inflows into the Indian stock market or perhaps net outflows. There's little doubt that some volatility will result, as we've seen over 2022. However, times have changed. The Indian markets are now much more resilient to such shocks than earlier. Large domestic inflows, especially from equity SIPs and the EPFO, provide a cushion that was missing earlier. The Indian stock market is Indian now, not a colony of FII inflows as it used to be. Some hiccups might be coming, but investors would do well to stay focussed on the quality of their investments and not shy away from taking advantage of low equity prices.

At the end of the day, domestic businesses, domestic stocks and domestic inflows will determine the fate of our investments, and we're more than likely to end 2023 with the slogan, 'All is well.'

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