INSUBCONTINENT EXCLUSIVE:
Indian markets are fast closing the performance gap with other global markets, thanks to the pre-election rally and strong flows from
Until mid-February, the benchmark Nifty index was among the biggest underperformers globally
But after February 19, when the current leg of the rally in the Indian equities started, the Nifty soared 11.3 per cent in dollar terms,
making it the best performing major global market index only after China
The top 20 global indices rose an average of 5 per cent during the period, data compiled from Bloomberg showed.
Since February, while Indian
markets gained momentum, other developed and emerging markets (EM) remained muted
For instance, South Korea’s benchmark Kospi was up over 9 per cent till mid-February, but the index managed to grow only less than 2 per
Similarly, the US benchmark Dow Jones Industrial Average gained 11 per cent till mid-February after which it added just 1.9 per cent
Nifty’s underperformance with Kospi was 12 per cent till February, but now the gap is only 1.5 per cent; while with Dow Jones, Nifty’s
underperformance was 14 per cent till February, but now the gap is down to 4.5 per cent.
“EMs started witnessing FII inflows right from
January 2019 as US bond yields started coming off
This led to flow of money away from the US to EMs,” said Siddharth Khemka, head retail research at Motilal Oswal
“However, the flows weren’t coming to India on account of several uncertainties including the geo-political tensions with Pakistan
From late-February there was a sudden rush among FIIs for Indian stocks since the tensions subsided and the macro-environment started
looking better.”
Concerns over liquidity in debt markets along with political uncertainty and expensive valuations led the Nifty to
correct 12 per cent between September and October 2018
From there, markets remained largely choppy until mid-February amid strong sell-off by foreign funds
Between September 2018 and January 2019, foreign institutional investors (FIIs) pulled out Rs 35,000 crore from the Indian
equities.
However, things started turning in February 2019, post the Union Budget
The general elections was the biggest headwind market was facing during the time
Post February, markets started a preelection rally with opinion polls suggesting a comeback for the current National Democratic Alliance
(NDA) government giving the Street hope of policy continuity
Since then FIIs started buying Indian shares aggressively
Stock exchange data show that FIIs have net purchased shares worth Rs 65,115 crore since February.
“The market sentiment was boosted by
expectations that the incumbent government will come back to power ensuring policy continuity,” said Gaurav Dua, head of research,
Sharekhan.
This rally was also supported by the buoyancy in some of the index heavyweights of the Nifty
For instance, shares of Reliance Industries have gained close to 20 per cent in 2019.
