India underperforms BRIC peers with negative returns this year

A combination of a rise in commodity prices such as oil, currency movement led to the fall in preformance, says an Edelweiss report

Last year India was amongst the best performing emerging markets and this year it's the only country in the BRIC pack to have given negative returns.

A combination of a rise in commodity prices such as oil, currency movement and unfavourable local factors have made India less of an investor favourite in 2015 than it was last year. The commodity-heavy countries on the other hand, have significantly outperformed compared to India, as well as their own performance last year. Brazil and Russia are both in double-digit return territory. China has also done well on the back of easing liquidity in the country.

The underperformance comes after a year in which India gave returns of over 30 per cent, with many individual stocks up multiple times over the course of the year.

An Edelweiss Securities report entitled 'Strategy - Nifty‘s correction: Look West, not East' attributed the shift in India's fortunes to commodity price movements led by a strengthening dollar.

“The epicenter of dislocation in global markets is the reversal of USD strength since March 2015. It triggered a re-allocation in global asset markets. The associated commodity spike, in turn, causing a rotation with in the asset class. India was caught on the wrong side of this trend reversal,” said the report authored by analysts Nirav Sheth and Kapil Gupta released this month.

Edelweiss believes that the current dollar strengthening trend has pretty much played out, and that commodities should start correcting. This would help India over a longer time-frame, it said.

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