The slight uptick in Indian rupee and the recent move by the government to ease FDI norms have brought some cheer to markets, but it may be ‘too little, too late’ as equities continue to feature among the top five worst performing markets in the world.
According to Bloomberg data, the Sensex and Nifty have given negative returns of 4.5% and 6%, respectively, in dollar terms since the start of CY13. While the number may have improved from last month’s (year-to-date dollar return of -11% in June-end), it remains a concern given that India saw the second highest inflows by overseas investors.
Even in local currency terms, the 30-share gauge has given positive returns of just 3.72% and trails the performance of other Asian, emerging market and developed markets equities by a wide margin.
Brazil tops the list as the most underperformed market so far during the year. The Bovespa index — the main indicator of the Brazilian stock market's average performance — has given negative returns of -27.9% in dollar terms. South Korea's Kospi (-11.1%), Russia's Micex Stock index (-8.36%), and Mexico's IPC index (-5.26%) complete the list of top five underperforming markets.
Experts attribute India’s underperformance to a weakening rupee, which dropped over 10% in one month.
While other Asian and EM equities also saw pressure from a strong dollar, experts said India’s balance sheet problems and failure to announce economic reforms on a timely basis did more damage to Indian equities. Apart from the rupee, the benefit from lower crude oil and commodity prices has also started to wane. With crude oil prices heading back towards $110-a-barrel and the Indian currency near record lows, India’s oil bill is going nowhere but north, they said.
“Poor Chinese economic data and higher oil prices is not helping India either. If you take the currency depreciation and today's oil price, it is equivalent to crude oil at $150 a barrel that we saw in 2008. So, all the talk about commodity prices heading lower and current account deficit getting