Indian markets lead Asian rally
Even in dollar terms, the Indian benchmarks fared better than Asian markets even as the rupee lost more than 3% of its value in the last eleven months and remained volatile. The dollar-term gains of the Nifty and the Sensex stand at 20-22%, in line with the gains made by Singapore’s Strait Times.
Despite its outstanding performance, the Sensex is currently trading close to its long-term valuations. At the current level of 19,171, the index is trading at about 16 times its 2012-13 earnings and 13.7 times its 2013-14 earnings. This indicates that the market is not very expensive and there is still some upside left.
Over the past 2-3 quarters, both Asia Ex-Japan and GEM funds have turned overweight on India relative to the benchmarks—the former by +1.9% and the latter by +1.0%. In a recent report BNP Paribas noted that the sources of FII flows had changed slightly in recent months.
“We are seeing more flows from 'regular' sources and flows from 'other' or unexplained sources have declined from 50% in 1H12 to less than 20% in 3Q12,” the report observed.
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