The first half of 2023 has seen significant movements in various asset classes, including the stock market, gold, bonds, and currencies. The Indian stock market, represented by indices such as Sensex and Nifty, has witnessed a sharp rally, with all major indices posting record highs. The Sensex jumped 803.14 points, or 1.26%, to close at a record level of 64,718.56, while the Nifty rallied 216.95 points, or 1.14%, to end at 19,189.05. These gains have resulted in the biggest quarterly gains in nearly two years, with the Nifty surging 10% in the April-June period.
The market rally can be attributed to a combination of domestic and global factors. The resilient local macroeconomic background, sustained inflow of foreign capital, better corporate performance, and hopes of an end to interest rate hikes have all contributed to the record highs. Foreign portfolio investors (FPIs) have poured in more than ₹61,600 crore into Indian equities during the first half of 2023. This influx of foreign capital has led to a significant increase in the market capitalization of BSE-listed companies, which has jumped by more than 13.47 lakh crore to ₹296.67 lakh crore.
Analysts expect the market rally to continue in the second half of the year, with the Nifty potentially reaching levels of around 21,000 by December-end. Factors such as a good monsoon, government schemes driving rural demand, and the financial services sector’s strong performance are expected to support the market’s upward trajectory. Additionally, the risk-on mode of foreign institutional investors (FIIs) and the movement of emerging market funds out of China are expected to benefit the Indian markets.
While the stock market has performed well, other asset classes have also seen noteworthy movements. Gold prices in India have risen by around ₹3,000 per 10 grams, or a gain of 5.3% so far this year. Geopolitical uncertainties and expectations of an end to the interest rate hike cycle by major central banks have contributed to the volatility in gold prices. The outlook for gold remains bullish, supported by sustaining geopolitical risks, weakness in the Indian rupee, and upcoming general elections in India.
On the other hand, the Indian rupee has appreciated by around 1% against the US dollar this year. Factors such as prompt intervention from the Reserve Bank of India (RBI), an improving domestic economic scenario, and lower crude oil prices have supported the local currency. The trading range for the rupee is expected to be between 80-50.84.00 going forward.
In terms of fixed deposits, the interest rate hike cycle by the RBI has benefited investors. The central bank has raised interest rates cumulatively by 250 basis points since May 2022. Although there was a pause in rate hikes in April and June, commercial banks have increased the interest rates offered on fixed deposits. Public sector banks, however, have lagged behind smaller private banks, small finance banks, and foreign banks in offering higher interest rates.
Finally, the yields on the benchmark 10-year bond have dropped by 20 basis points during the first half of 2023. The range for bond yields has been between 6.90% and 7.50%. This decline in yields indicates lower borrowing costs for the government and potentially lower interest rates for borrowers.
Overall, the first half of 2023 has seen positive performances in various asset classes. The stock market has rallied, gold prices have risen, interest rates on fixed deposits have increased, and the Indian rupee has appreciated. These movements suggest a positive outlook for investors while highlighting the importance of diversifying one’s portfolio across different asset classes.
