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.