NEW DELHI: The global equity sell-off triggered by a long-expected market correction in the United States this month has had its effect on India’s stock markets. Combined with internal factors like a less-market friendly budget and rising inflation, Indian stock markets have fallen in tandem with its peers since February 1, with the benchmark Sensex index down 5.3 per cent — from 35,906.66 points at the start of the month to 34,005.76 points on February 9. But, despite the sharp dip in the indices, India has still fared much better than most of its Asian peers.
Compare Sensex’s fall during the period with China’s SSE Composite Index. The latter has fallen at nearly twice the rate, losing 9.2 per cent. Japan’s benchmark Nikkei, meanwhile, has fallen 8.95 per cent. As have South Korea’s KOSPI (7.97 per cent), Hong Kong’s Hang Sang (9.6 per cent) and Taiwan’s Taiex (7.06 per cent), all of which have fared much worse than India’s Nifty and Sensex.
Analysts and brokerages point out that a lot of the impact has been mitigated by the rather large quantum of domestic investors who have been the drivers of the recent upswing in India’s stock markets. And, while the global panic is also being driven by the feeling that stock values are currently significantly overvalued compared to earnings, India’s corporate earnings are starting to show firm signs of recovery after months of turmoil.
Vinod Nair, head of research, Geojit Financial Services, pointed out that while indices lost 2.8 per cent this week, “some buying interest was witnessed in the mid & small cap stocks post recent sharp correction”. “The current earnings season is providing strong signs of revival in corporate earnings underlining the long term growth prospects, which is providing relief for investors,” Nair noted. But, he cautioned that prevailing inflationary pressure and fiscal slippage may turn RBI to a more hawkish stance in the near future, with higher interest rates impacting near term profitability of domestic companies.