The Sensex has rallied all the way from 8,700 level that it hit in October 2008 to over 17,000 in January this year. That?s a phenomenal rebound of over 90% but unfortunately most retail investors haven?t really made it to the party. Market watchers say that some have participated through the insurance route; after all over 90% of premiums collected by life insurers are invested in unit-linked insurance plans or Ulips and much of the money goes into equity schemes.
But a glance at the data shows that retail investors aren?t exactly rushing to the market. Numbers crunched by Kotak Securities indicate that adjusted premiums collected between April 2009 and January 2010, grew just 11% year-on-year to just over Rs 40,000 crore, and that too not on a very high base. In fact, the y-o-y growth for January alone has been just 4% on a very low base. Premium collections dipped in January compared to December. As for mutual funds, they saw net outflows from equity schemes,in every single month between August and December, the total outflow being over Rs 7,000 crore. However, both January and February have seen inflows to the tune of Rs 1,800 crore. Interestingly, JP Morgan reports that retail investors worldwide have been buyers for four straight weeks to March 12, 2010.
But worldwide too institutions will the rally fizzle out or will markets scale new highs? Despite anxiety about a delayed global economic recovery and high double?digit inflation prompting a rise in interest rates, foreign investors are flocking to India. Indeed equities in other markets too have risen in four of the five weeks to March 12, 2010 to recover nearly 90 % of the losses between mid-January and mid-February. JP Morgan observes that ?Our overweight in risky assets is primarily a macro-value strategy based on the judgement that risk premia in the market are high and attractive relative to gradually fading macro risks in the world.?
There?s no doubt that money is sloshing around. Flows into emerging market equity funds have hit an eight-week high and Japan equity funds haven?t seen such a long winning streak in over three years. Inflows into Asian funds quadrupled week-on-week to hit $754 million in the week to March 10, 2010. This, according to Citi, has been the biggest inflow in three months. Citi points out that foreigners are likely to put more money into Asian funds as they hope for an earnings?driven rally. In nominal terms, Asian funds continue to beat the rest of the merging market funds India has probably seen more than its fair share of inflows. FIIs have been net buyers of Indian stocks for 13 consecutive sessions since February 26, 2010 pushing the Sensex by nearly 8% to 17,490. At 17,490, the Sensex is now the most expensive in Asia; Bloomberg data shows that based on next year?s earnings estimates India commands a price-earnings multiple of 16.8 times while Taiwan is valued at 13.3 times and the Korean Kospi trades at just under 10 times. Markets like Brazil too are way cheaper valued at just over 11 times. India it appears will continue to command a premium over its peers.