which could favour the Indian equity markets.
According to German major, Deutsche Bank, more investors could flock back to equities amid a fall in risk aversion and rising confidence around global growth. Further, the US is expected to stage a stronger-than-expected recovery.
“Equities are cheap relative to bonds... The ERP (Equity Risk Premium) is at its highest multi-year level since the early 1980s. In the US, reduction in fiscal policy uncertainty will be supportive of growth in H2 of 2013,” said Deutsche Bank in its ‘Themes 2013’ report.
Andrew Holland, CEO, Ambit Investment Advisory, said Indian markets benefited from a combination of events in September and remained optimistic of continued fund flows. Holland said, “India was the cleanest shirt in the laundry basket because of the conditions in global market. While the laundry basket could change, it doesn't mean FII inflows will stop coming to India.”
Indian markets has also attracted the highest amount of foreign flows compared with Asian peers. As per Bloomberg data, year-to-date inflows in Indian equities stand at over $24 billion. Japan stood second with $16 billion of overseas inflows since January, followed by South Korea ($15.1 billion), Taiwan ($4.7 billion), Philippines ($2.5 billion), Thailand ($2.45 billion) and Indonesia ($1.65 billion).
However, even as equity inflows in Indian markets have been robust, the market performance for December (purely in terms of percentage returns) has been among the worst in more than a decade.
As per Bloomberg data, the 30-share Sensex has given -0.5% returns so far this month vis-a-vis record inflows in December. In December 2011, Sensex gave -4.15% returns vis-a-via FII inflows of as low as $19.66 million.