In CY13, Indian equities among worst performers despite record FII inflows
that China posed a near-term possible risk to India as fears of hard landing in world's largest second economy have abated. Swiss major Credit Suisse, on the other hand, raised doubts over whether Indian markets were in an overbought territory, highlighting that investors were concerned about the risk of a tactical correction.Market experts attributed the recent underperformance in Indian equities to selling by local or domestic institutions. Data show that while FIIs have net bought $4.5 billion worth of Indian equities, domestic institutional investors (DIIs) have sold a little over $3.4 billion worth (R18,000 crore) of Indian equities since the beginning of CY13.
DIIs continue to remain on the selling side due to redemption pressure because of the recent rally in Indian equities while participation from retail investors has remained stagnant.
“Domestic institutions have taken advantage of the rally to redeem their positions and book profits. Further, retail participation is not huge and brokerage volumes have been more or less stable, which explain why the Indian markets have underperformed the peers,” said Vinay Khattar, vice-president, head research, Edelweiss Capital Markets. Experts said India is in a consolidation mode after a sharp rally last year. “The Sensex is trading at 16 times P/E, but corporate India's earnings expansion will play out in 2-3 quarters. The market has to see real economic traction, such as increase in consumption and infrastructure spending, to sustain the rally,” said Khattar.
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