Nifty outperforms MSCI EM for tenth quarter on the trot, shows data

The Nifty rose 8.3 per cent during the quarter ended September 2022-23, even as the MSCI Emerging Markets (EM) Index fell 12.5 per cent. This domestic index has outperformed the MSCI EM Index for an unprecedented 10 straight quarters.

The gauge tracks equity performance, capturing large- and mid-cap companies across 25 EMs, including India.

The last time it had delivered superior returns vis-à-vis the Nifty was in the pandemic-hit January-March 2019-20 quarter. Since then, the Nifty has nearly doubled, while the MSCI EM has seen its entire post-pandemic gains getting wiped out.

India’s 12-month forward price-to-earnings (P/E) multiple is nearly double the EM pack’s.

“One should look at P/E in the context of interest rates and earnings growth. In terms of earnings growth, India is ahead of the rest. Historically, India always had better-than-expected earnings growth. India is a growth island. The valuation premium will sustain as long as the growth momentum sustains,” says U R Bhat, co-founder, of Alphaniti Fintech.

The MSCI EM’s subpar performance is largely on account of China and Taiwan haemorrhaging. They account for nearly half of the index weighting.

India’s superior rendition has made it the second-biggest index weight after China and ahead of Taiwan and South Korea.