All except three Indian sectoral indices have outperformed their US counterparts in 2022 so far

• The one S&P index that has far outperformed all the other indices is energy, thanks to the boiling crude oil prices.
• Strong domestic investor flows, healthy Q2 performance by India Inc, and better GDP growth compared to other major economies have helped Indian equity markets rally.
• Two BSE indices have fared worse than their US counterparts.

All except three sectoral indices on the Bombay Stock Exchange (BSE 500) have outperformed their US counterparts in 2022 so far, according to an analysis by Motilal Oswal. In some cases, the gap between an index’s performance on the BSE 500 and its US counterpart on the S&P 500 has been as wide as 34%.

According to the Motilal Oswal report, the two BSE indices that have fared worse than their US counterparts are healthcare and IT, but by relatively smaller margins. The one S&P index that has far outperformed all the other indices is energy, thanks to the boiling crude oil prices – Brent crude prices hit $124 per barrel this year.

Overall, Indian equity markets have outperformed their global peers in 2022 so far. Multiple reasons like strong domestic investor flows, healthy financial performance of Indian companies, better control over inflation and better GDP growth compared to other major economies have contributed to outperformance by the benchmark Sensex and Nifty50 indices.

Even foreign institutional investors turned net buyers in November, pouring in ₹22,546 crore, making it the best month in 2022 so far.

Utilities, industrials, FMCG indices biggest gainers

The BSE 500’s outperformance was driven by utilities, industrials, and FMCG indices, consisting of companies like Adani Green, Adani Power, Hindustan Unilever, ITC and Britannia, among others.

While these three indices registered a decline in the range of 2-5% on the S&P 500, they surged between 20-31% on the BSE 500.

The financials index was another notable outperformer, rising 12% while its US counterpart declined 9%. The interest rate hikes benefited Indian banks and financial services companies, which reflected in their earnings, too.

The general consensus among analysts is that for the public sector banks, the “music could play a little longer” due to potential interest rate hikes by central banks.

Energy drives on crude oil surge – others decline

The energy index stands out for outperforming every other index on the S&P 500 – it has surged 68% in 2022 so far, on the back of a surge in crude oil prices due to the Russia-Ukraine war this year.

On the other hand, every other index on the S&P 500 has registered a decline, with the telecom, consumer discretionary and realty indices declining the most.

In contrast, the performance of indices on BSE 500 was largely positive, with only three out of the ten indices registering a decline – healthcare, IT and realty.

Healthcare stocks have delivered a subdued performance in 2022 so far, in part due to competition in the international markets.

What stands out is the impact of recessionary headwinds on India’s IT sector, which is largely export driven. While US tech companies have seen declines too, the overall IT services index fell 17% only compared with the 19% decline of the IT services index on the BSE 500.

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