One year of lockdown: India outperforms top Asian markets

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The Indian equity market has outdone other Asian peers since March 24 last year, the day lockdown restrictions were implemented. Data collated by Money9 showed that the domestic benchmark equity indices BSE Sensex and NSE Nifty soared nearly 88% in the past year following robust inflows by foreign institutional investors coupled with liquidy measures taken by the Reserve Bank of India (RBI) and the government.

With a rally of 86%, South Korea’s Kospi index emerged as the second-best performer. Vietnam’s Ho Chi Minh Stock index, Taiwan’s TWSE, Singapore’s STI, Hong Kong’s Hang Seng, Japan’s Nikkei and China’s Shanghai index have gained between 23%-77% since March last year.

Commenting on the factors which led to the bull run in the Indian markets, Sanjeev Jain, VP Equity Research, Sunness Capital India said: “The government’s recent structural changes in the economy coupled with strong policy actions with implementation and India’s open-door strategies for overseas investors or companies boosted the confidence of market participants in our markets.”

“The government and RBI have taken the unprecedented Covid situation very smartly and proactively and somehow it has been successful. Consequently, renowned rating agencies have upgraded India’s growth projection, which led to boosted the FIIs confidence in the Indian economy. On the flip side rising covid numbers are a worry with regard to economic activities,” Jain added.

In its recent projection this month, Moody’s Analytics said that the Indian economy is likely to grow by 12% in 2021 following a 7.1% contraction last year, as near-term prospects have turned more favourable.

A stronger than expected December quarter GDP growth of 0.4% following a 7.5% contraction in the last three months has turned India’s near-term prospects more favourable, Moody’s said.

Meanwhile, foreign institutional investors have poured their highest ever yearly inflows of Rs 2.78 lakh crore so far in the domestic market in the current financial year. Their net inflows stood at Rs 6,153 crore in FY20, while the net outflow stood at Rs 88 crore in FY19, data available with depository NSDL showed.

G Chokkalingam, Founder, Equinomics Research and Advisory said, “Faster economic recovery and effective control of coronavirus till February contributed to the rally. As far as FIIs are concerned, they turned bullish because of widespread opportunities in several large midcap stocks and also substantial recovery in corporate earnings of many companies. Outperforming inflow of FDIs also strengthened optimism on Indian markets as same can strengthen significantly rupee going forward.”

Sharing his views on other Asian peers, he added that Japan can improve its momentum going ahead. However, he has doubts about China and Taiwan given the political uncertainties and rising debt in China. Hence, there are chances that India is likely to outperform these two major economies.