Rupee, stocks give best start in a decade to markets

However, valuations of markets look expensive compared to their long-term historical averages

In 2017, rising rupee and soaring stocks got markets off to their best start in more than a decade. The benchmark Sensex ran up 20 per cent in dollar terms and 13 per cent in rupee terms, its best January-April performance since 2006 and 2009, respectively, thanks to risk-on behaviour shown by global investors. Most other emerging and developed markets have gained on global growth outlook and optimism surrounding Trump’s reforms. Following the sharp run this year, valuations of Indian markets look expensive compared to their long-term historical averages. 

Interestingly, the Indian markets started well and ended even better in 2006 and 2009 both, clocking 47 per cent and 81 per cent rupee returns, respectively. For something similar to play out this year, corporate earnings growth will have to some serious catching up to do. Also, positive global sentiment will have to carry on.