India was outperforming most of the world’s stock markets after the global trough of 2008. But its tendency to outshine has dipped sharply over the past year.
While Indian markets recuperated well from the lows of 2008, they lagged several markets in terms of returns generated since January 2010.
A study of returns generated by premier indices of 29 countries show that the benchmark Sensex rose 147% since it hit a low of 7,697 on October 27, 2008. However, the index has generated 9% return since January 2010 and ranked a distant 18 as rising inflation and interest rates led to dampening sentiments.
Gains made by the Indian markets in 2010 on the back of strong FII inflows of R133,266 crore have been negated by concerns surrounding rising prices. Experts say other than domestic concerns, movement of money to export-oriented countries and pressure on commodity prices also hit sentiments in 2010.
Argentina tops the performance list of 2010 with a 56.7% return, while Thailand and Indonesia come at second and third places.
China, which has also been battling inflation and has raised interest rates over the past few months, is at the bottom of the list and its stocks have fallen by 18.3% since January 2010.
“In the past two months the view over a better growth in the United States is getting stronger and that has resulted in rotation of money from countries whose economy is not so linked to US to economies that are more linked to US and are export oriented,” said the head of equity research at a leading global financial services firm, who did not want to be identified.
Clearly, the markets are rising in economies with more stable macroeconomic environment. For India, experts say that the markets are expected to remain volatile in the current year, as the government and the Reserve Bank of India would be busy trying to contain a runaway inflation while keeping growth intact.