Unlike most of its peers, Indian equities bid goodbye to 2022 on a good note as optimism over domestic growth prospects overshadowed the macroeconomic headwinds that developed and other major developing economies are currently experiencing.Indian equities were the second best performers in 2022, with the first one being Brazil.Domestic benchmarks Nifty 50 and Sensex gained 4.3% and 4.4%, respectively, last year. On the contrary, key indices in the US, Europe, China, Hong Kong, Taiwan, South Korea, and Russia have tumbled 9-39% in the said period. Russia was the worst performer, with the benchmark RTS index tumbling 39% as the country’s invasion of Ukraine led to geopolitical tensions, triggering stringent sanctions by the US and Europe against the largest country in the world.The geopolitical tensions between Russia and Ukraine had a cascading effect on other world economies as commodity prices skyrocketed, inflation hit multi-decades high in the US and Europe and forced central banks to hike interest rates like never before.In 2022, the US Federal Reserve raised the federal funds rate by a whopping 425 basis points to 4.25-4.50%.Adding to the woes was the COVID crisis in China, which forced the country to implement “zero COVID policy” for a major part of the year. The consequent slowdown in the world’s second largest economy further dampened global growth prospects.The relentless hike in interest rates by the US Federal Reserve, European Central Bank, and Bank of England to tame inflation hit consumption hard and economic growth to the extent that the two developed economies are on the brink of a recession.“In both countries (US and China), a ‘soft pivot’ will likely take the shape of increased tolerance for the problem, against a backdrop of hard talk,” Deutsche Bank said in its 2023 outlook report.The US Fed will continue to talk a tough game on inflation, however, as inflation falls, it may consider easing shadow rates, or accepting some above-target price growth. In China, the tolerance for new cases in certain areas may gradually rise, particularly in key economic regions, the global investment bank said.OASIS IN THE DESERTAmid the global mayhem, India managed to grow at a better pace even as the Reserve Bank of India raised the repo rate cumulatively by 225 bps in 2022.The year saw private and public sector capital expenditure hit all-time high levels, utilisation rates moving to pre-pandemic levels, real estate sector seeing best-ever growth in demand, railway earnings rising in double-digits, direct tax collection surging 31%, and corporate sector earnings growing in double digits despite inflation headwinds.India bucked the global trend despite seeing record selling by foreign portfolio investors (FPI), due to stellar inflows from domestic institutional investors (DII).In a year, when FPIs net sold Indian equities worth nearly $18 billion, DIIs poured a record Rs 1.8 lakh crore of money into the market.But most market experts see FPIs coming back in a big way in 2023 given that growth outlook remains bright in an uncertain global environment.“We believe India will be preferred by global investors because this is the country where rule of law and democracy is visible and global investors can take longer-term calls of becoming an investor in India rather than the technical call of becoming a trader in China,” Kotak Mutual Fund said in a note. While the current valuation of India is at a significant premium to peers and is worrying some analysts, they continue to see the country as an important investment destination for foreign investors.Most of them see India-dedicated inflows coming through over the next few years given the improved position of the country in the MSCI EM index.(Data inputs from Ritesh Presswala)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)