As the year 2022 draws to an end, it’s a good time to sum up what happened during the year! In this regard, let’s have a re-look at the five major events in the financial world that took place in 2022:
The Russia-Ukraine War
In late February 2022, Russia began a war with Ukraine as it felt that the latter’s inclusion in NATO (North Atlantic Treaty Organisation) would be a security breach for Russia.
What followed was a world divided into two sides, with the western countries (the US and Europe) condemning Russia for initiating a war. At the same time, India took a neutral stance over the matter and continued buying discounted oil from Russia for 2022. Russia has become India’s top oil supplier accounting for 21% of India’s total oil imports. Also, what followed the war was a supply disruption of oil and gas and skyrocketing energy prices in Europe!
After two years of remarkable economic growth (2020 and 2021) after the pandemic, inflation started to haunt the global economy. And that’s what made the Indian stock market jittery for 2022 as consumers cut down on non-essential purchases after the pent-up demand eroded and corporate margins declined due to a surge in energy and raw material costs.
In India, inflation had jumped to as high as 7-8%, which is now coming down. Inflationary figures across the US and Europe were much worse.
Repo Rate Hikes
Now to control spiralling inflation, the Reserve Bank of India started to increase the Repo Rate from May 2022 onwards so that there’s less money flowing into the economy and demand somewhat cools off. And the RBI has increased this repo rate from 4% to 6.25%, which is a hike of 225 basis points.
An increase in the repo rate makes borrowing costly for borrowers, and thus there’s less money floating in the economy, which helps control inflation over time.
Elections in China
The elections in China took place in October 2022, and Xi Jinping was once again sworn in as the President for a third consecutive term! As the Jinping government does not fully loosen COVID-19 restrictions, global firms are looking to shift/diversify their production base. And that’s what can act in India’s favour. It is a gain to benefit from the China+1 strategy.
This can be seen in the case of Apple, which plans to manufacture 25% of its total iPhone production in India by FY25 from the current 5%!
And lastly, 2022 also saw one of the awaited IPO, the LIC IPO, through which the Indian government divested a 3.5% stake and raised Rs 21,000 crores. Through this IPO, the government moved closer to its asset monetisation plans announced in the budget. However, LIC’s stock currently trades below its IPO issue price!
There are five significant events that took place in 2022, and some of them will also play an essential role in shaping the Indian as well as the global economy as we step into 2023! Hence, revisiting them once again can help charter your future course of action regarding your investments and asset allocation!