Indian markets log new highs even as global peers stare at losses

Experts say gains by Indian equities will be steady if is no crude oil price surge

Indian markets are consistently bookmarking new highs, even as the world’s two biggest markets are in deep red. Except for Indonesia, markets across Asia and Europe continue to languish, hit by headwinds, such as monetary tightening, fears of global recession, and crisis arising out of the Russia-Ukraine stand-off.

Equity gauges for China and Hong Kong are currently trading at half their record highs, while the technology-heavy Nasdaq is down more than 30 per cent. The Nifty on Tuesday surpassed its previous lifetime high made on October 19 on an intraday basis.

Most global markets have rallied in November — many even outperforming India. However, the correction seen earlier this year has been quite severe. India, on the other hand, managed to stave off a big correction, notwithstanding record overseas outflows as a result of domestic liquidity support and relatively better economic prospects.

Major global companies have been on a sticky wicket on the back of runaway inflation, disruption in commodity prices due to the Russia-Ukraine face-off, lockdowns in China, and unwinding of post-pandemic stimulus measures.

Inflation, which reached the highest levels in decades in the US and other major economies, challenged the ‘transitory’ narrative of major central banks and forced them to prioritise reining in price rises.

Central bankers went to the extent of stating that inflation had to be tamed, even if compromising on growth was the price to be paid. This stance led investors to take money out of equities.

The Covid restrictions in China, slowdown in its economy, and the recent unrest have kept equity markets across the globe on edge and sparked speculation over the reopening of the world’s second-largest economy.

Indian markets benefited from strong inflows from retail investors who invest directly in the markets. India’s dematerialised account crossed the 100-million mark this year. The Indian economy’s better prospects, compared to peers, are also cited as a reason for its better run.

The decline in crude oil prices has further bolstered investor sentiment. From its highs, the Brent crude has corrected 40 per cent this year as weak economic data from China fuelled concern about energy demand.

“The slide in oil prices has been a blessing in disguise for India as it has reduced the import bill. All the macro indicators like the goods and services tax collection and automotive sales are pointing towards the post-pandemic economic distress being a thing of the past. Our market is better performing when weighed up against other emerging markets (EMs). China was the biggest EM for investors; some of the flows are coming to India. Even corporations are coming out with better results,” said U R Bhat, co-founder, Alphaniti Fintech.

Bhat added that depreciation of the rupee has taken some sheen off the gains made by Indian equity benchmarks. 

Experts said the gains by Indian equities would be steady as long as there is no spurt in crude oil prices.

“There is a possibility of minor correction if China eases lockdown curbs as one might see oil prices rising,” said Chokkalingam G, founder, Equinomics Research & Advisory.

Experts believe India could underperform whenever the headwinds ease for the US and the China markets since they offer much better value on a relative basis.

“Given the rate at which our markets have gone up, I would expect a revisiting of basic assumptions. Notwithstanding the robustness of the economy, valuations have run up too sharply. I expect some correction after the Nifty hits 19,000-19,500 levels. A one-way street is never good,” added Chokkalingam.