Amongst the emerging markets, India made the most of the bull run witnessed in the year 2007. But, the Indian markets are now among the worst performers among peers in terms of recovering from the recent subprime crisis.
Among the key Asian markets, China?s Shanghai Composite was the worst performer, which fell by more than 32% since the beginning of the year, while the Jakarta Composite Index lost 18.4%. The 30-share Sensex of the Bombay Stock Exchange was the third worst performer, posting a negative return of around 15%. This was followed by the Kuala Lumpur Composite Index, which fell 11% in the same time period.
Amongst the Bric nations, Brazil?s Bovespa index proved to be the most resilient and gained around 1% (on a comparatively higher base) since the beginning of the year, followed by the Russian index, where the fall was limited to only 1.15%. The slide in the Russian market was far less than the magnitude with which the markets of the other two Bric nations, India and China, have fallen.
Experts believe that the subprime and credit derivatives-related issues gripping the US banks have forced the FIIs to withdraw funds from the Indian markets, causing most of the damage. Also, local problems such as the spiking inflation and a fear of intermittent interest rate hike by the Reserve Bank of India are equally responsible for investors? apprehensions.
Explains Shahina Mukadam, head, equity research, IDBI Capital Markets, ?With the exception of India, all the other markets in the Bric category are higher growth markets with a huge dependence on the US economy. However, in case of India, domestic issues such as the spiraling inflation and a liquidity squeeze, coupled with lesser participation from the retail segment, have caused a swift fall compared with other emerging markets. Indian markets did fairly well amongst the peers in 2007, leaving the valuations high compared with other markets seeking attention from the FIIs.?