Indian markets outperform global peers in first half of FY15
Indian markets outperform global peers in first half of FY15
Indian markets rose nearly 19% in the first half of the current financial year (H1FY15) and were the best performing markets globally during this period. The rise comes on the back of strong flows from foreign institutional investors (FIIs) who invested in a hope that the new government at the Centre will revive key policy reforms that would help kick-start economic growth.
Since April, FIIs have invested nearly Rs 61,024 crores ($10.2 billion) till 26th September, while the Mutual Funds have put in Rs 15,298 crores during the same period, Sebi data shows. The market rally, which was commonly-referred to as Modi-rally on Dalal Street, had coincided with crowning of Narendra Modi as the Prime Minister in May and saw the benchmark indices - the S&P BSE Sensex and the CNX Nifty hit record high levels of 27,355 and 8,180, respectively post the outcome of the general election.
"Since the formation of the government, NDA (National Democratic Alliance) has made all the right noises, through the Union Budget and a series of announcements, which had a positive impact on sentiments and investment climate. The equity market has also given a thumbs up to most of the initiatives," points out a recent India Update note by ICICI Securities.
The rally in the mid-and small-cap stocks outpaced the rise in the benchmarks with the CNX Mid-cap and the CNX Small-cap indices gaining 32% and 34%, respectively during this period. Among sectors, consumer durables, pharma, automobiles and PSU were among the top gainers that moved up between 23 - 40%.
The road ahead
While most analysts agree that the rally has more steam left, they expect the markets to consolidate as before resuming their upward march and suggest that investors should brace for volatility in this backdrop.
Vaibhav Sanghavi, director - equities at Ambit Investment Advisors feels that in the immediate term, the markets will react to the corporate results season in October and over the next six months, the Union Budget will also be a key determinant of how the markets play out.
"At the same time, there are a lot of events stacked up at the global level such as tapering of the bond buying programme by the US Federal Reserve (US Fed), economic data from Europe, China etc besides the geopolitical risks. Beyond October, investors should brace for volatility, which is likely on account of global factors rather than domestic," he says.
As regards FII flows into India, analysts suggest that long only funds that come in given the likely improvement in economy and in turn corporate performance will continue to pour in.
However, in terms of the hot money flows are likely to get impacted due to realignment of carry trades. A stronger dollar can possible see some flight of capital back to the US.
Points out Lalit Nambiar, fund manager, UTI Mutual Fund: "The strengthening of the US dollar will impact global markets, including India. Besides the State election results, the US news flow is the most critical thing that will influence market direction going ahead for India. One must realise that an improvement in domestic earnings is yet to show and the markets have moved up largely on hope."
"The next few months may not be as easy as the recent past on FII flows for Indian markets. One needs to be selective and patient while investing at the current levels as there can be some correction before the markets start to move up again. This will probably be relatively healthier for the Indian markets rather than a continuous run up which suddenly loses steam," he adds.
Sanghavi of Ambit sees India as the best bet among the emerging markets going ahead. Though he doesn't expect the markets to correct more than 5-10% from here on over the next six months, he does not expect the markets to move up more than 10-15% from the current levels.
On the domestic front, analysts are also keeping a tab on the government's reform agenda, which is expected to play out post the outcome of the State polls. Though they believe that the groundwork for certain essential reforms (GST, fuel price rationalisation, direct benefit schemes, government approvals) has largely been done, it is a question of implementation now.
Business Standard
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Indian markets rose nearly 19% in the first half of the current financial year (H1FY15) and were the best performing markets globally during this period. The rise comes on the back of strong flows from foreign institutional investors (FIIs) who invested in a hope that the new government at the Centre will revive key policy reforms that would help kick-start economic growth.
Since April, FIIs have invested nearly Rs 61,024 crores ($10.2 billion) till 26th September, while the Mutual Funds have put in Rs 15,298 crores during the same period, Sebi data shows. The market rally, which was commonly-referred to as Modi-rally on Dalal Street, had coincided with crowning of Narendra Modi as the Prime Minister in May and saw the benchmark indices - the S&P BSE Sensex and the CNX Nifty hit record high levels of 27,355 and 8,180, respectively post the outcome of the general election.
"Since the formation of the government, NDA (National Democratic Alliance) has made all the right noises, through the Union Budget and a series of announcements, which had a positive impact on sentiments and investment climate. The equity market has also given a thumbs up to most of the initiatives," points out a recent India Update note by ICICI Securities.
The rally in the mid-and small-cap stocks outpaced the rise in the benchmarks with the CNX Mid-cap and the CNX Small-cap indices gaining 32% and 34%, respectively during this period. Among sectors, consumer durables, pharma, automobiles and PSU were among the top gainers that moved up between 23 - 40%.
The road ahead
While most analysts agree that the rally has more steam left, they expect the markets to consolidate as before resuming their upward march and suggest that investors should brace for volatility in this backdrop.
Vaibhav Sanghavi, director - equities at Ambit Investment Advisors feels that in the immediate term, the markets will react to the corporate results season in October and over the next six months, the Union Budget will also be a key determinant of how the markets play out.
"At the same time, there are a lot of events stacked up at the global level such as tapering of the bond buying programme by the US Federal Reserve (US Fed), economic data from Europe, China etc besides the geopolitical risks. Beyond October, investors should brace for volatility, which is likely on account of global factors rather than domestic," he says.
As regards FII flows into India, analysts suggest that long only funds that come in given the likely improvement in economy and in turn corporate performance will continue to pour in.
However, in terms of the hot money flows are likely to get impacted due to realignment of carry trades. A stronger dollar can possible see some flight of capital back to the US.
Points out Lalit Nambiar, fund manager, UTI Mutual Fund: "The strengthening of the US dollar will impact global markets, including India. Besides the State election results, the US news flow is the most critical thing that will influence market direction going ahead for India. One must realise that an improvement in domestic earnings is yet to show and the markets have moved up largely on hope."
"The next few months may not be as easy as the recent past on FII flows for Indian markets. One needs to be selective and patient while investing at the current levels as there can be some correction before the markets start to move up again. This will probably be relatively healthier for the Indian markets rather than a continuous run up which suddenly loses steam," he adds.
Sanghavi of Ambit sees India as the best bet among the emerging markets going ahead. Though he doesn't expect the markets to correct more than 5-10% from here on over the next six months, he does not expect the markets to move up more than 10-15% from the current levels.
On the domestic front, analysts are also keeping a tab on the government's reform agenda, which is expected to play out post the outcome of the State polls. Though they believe that the groundwork for certain essential reforms (GST, fuel price rationalisation, direct benefit schemes, government approvals) has largely been done, it is a question of implementation now.
Business Standard
Sent from BlackBerry® on Airtel
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