Mumbai, Dec 31: Indian equities emerged as the best performer among the major emerging economies with a return of nearly 10 percent for a key index on the back of the close to $20 billion foreign fund inflow into the $1.1 trillion market.
Returns on India’s major stocks have beaten equities in BRICS partner countries Brazil, Russia and China. The performance of the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) was also among the best globally.
The two widely tracked indices of the Indian equities markets – Sensex and Nifty – scaled a new peaks in 2013.
The Sensex rose to a record high of 21,483.74 points, while Nifty touched a new peak of 6,415.25 points Dec 9, a day after the Bharatiya Janata Party (BJP) swept three out of four key state elections.
The assembly election results were percieved as bolstering the prospects of the BJP’s prime ministerial candidate Narendra Modi in the national polls due by May 2014. Modi, who is chief minister of Gujarat, is seen as pro-business and reform-oriented, and investors, especially foreign funds, pumped in money, hoping policy decisions would be fast-tracked if the party comes into power.
The Sensex, which opened 2013 at 19,513.45 points, ended the year at 21,170.68 points, registering a gain of 1,743.97 points or 8.97 percent over its previous year’s close at 19,426.71 points.
The index hit a high of 21,483.74 points, which is also a record, and low of 17,448.71 points during the year, data available with the bourse showed.
The wider 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) ended the year 6.74 percent higher at 6,304 points.
The Indian equities markets are among the best performers globally for the second consecutive year. The benchmark Sensex had gained 26 percent in 2012 on the back of a $24.6 billion inflow of foreign funds.
Data with the regulator, the Securities and Exchange Board of India (SEBI), showed, in 2013, overseas investors pumped in $19.9 billion in Indian equities markets, the biggest inflow in Asia after Japan.
Analysts and experts say the Indian markets would remain bullish for the third successive year in 2014 as well on improved economic outlook and if a stable government was formed after the general election.
Vaibhav Agrawal of Angel Broking said the Sensex is likely to scale a new peak of 24,600 points in 2014.
“In 2014 equity markets are likely to gain positively on the back of supportive global cues as well as improving domestic economic outlook,” Agrawal said.
“I anticipate better agricultural production to result in easing of inflation and that is in turn likely to give the RBI room to bring rates down. At the same time, revival in the investment cycle has the potential to boost GDP growth considerably. With these positives shaping up, I believe that the Sensex is likely to scale 24,600 over the coming one year,” he said.
The results of the general elections would be one of the major determining factors for the markets, says Vinod Sharma, head of private banking and wealth management services at HDFC Securities.
“The markets could rally cheerfully if it gradually emerges that Aam Aadmi Party (AAP) factor will not adversely impact the chances of BJP coming to power without the baggage of too many demanding allies,” Sharma said.
The Arvind Kejriwal-led AAP made a stunning debut in Delhi assembly elections by winning 28 of the 70 seats and forming a minority government with Congrss support.
Although the key indices ended 2013 on a fairly positive note, it was extremely volatile in the middle of the year due to worrying macro-economic situation and speculations of scaling back of stimulus by the US central bank.
“From the start of the year, the India’s fundamentals were worrisome, with our CAD at a historic 6.7 percent at the close of 2012,” Arun Gopalan, vice president of research and investments at broking firm Systematix Shares, pointed out.
Foreign funds pulled out $3.7 billion from the Indian equities markets between June and August leading to over 10 percent slide in the benchmark Sensex, following the US Federal Reserve’s May 17 announcement of possible scaling down on $85 billion bond-buying programme.
This led to a 27 percent depreciation in the value of Indian rupee. The partially convertible rupee hit a record low of 68.85 against a dollar Aug 28.
However, the Indian equities as well as the currency markets recovered on the back of a series of steps taken by the Reserve Bank and the government. They were further boosted after the Federal Reserve announced in mid-September that it would keep intact its $85 billion monthly bond-buying programme, known as Quantitative Easing (QE) 3.
Globally, developed markets have done much better than the emerging markets. Japanese stocks emerged as the best performer with Nikkei 225 index surging 57 percent in 2013.
The Dow Jones Industrial Average of the US gained 26 percent and S&P 500 has jumped 29 percent. Among the European markets, Britain’s FTSE 100 was up nearly 15 percent, while Germany’s Xetra Dax surged 26 percent till the end of the penultimate session of 2013.
In comparison, most of the emerging markets had tough times. China’s Shanghai Composite index fell 7.1 percent. Brazil’s benchmark index slumped 15.9 percent and Turkey’s key index dipped 18.3 percent in the year.
(Gyanendra Kumar Keshri can be reached at firstname.lastname@example.org)