The Indian markets have performed poorly over the past year with the majority of stocks posting negative returns though this has been masked by a rise in the benchmark indices.
Stocks lost value for a fourth straight session on Monday with investors spooked by the US’ threat of fresh trade tariffs on $200 billion worth of Chinese goods. The Indian markets have performed poorly over the past year with the majority of stocks posting negative returns though this has been masked by a rise in the benchmark indices.
How badly the broader market has performed can be seen in the BSE advances to declines ratio; this has stayed below one in the last one year. In 161 of the 247 trading sessions, the decline outpaced advances.
The Nifty Small cap index has given up nearly 21.7% over the past year while the Mid Cap index has lost 12.09% of its value. On Monday, the Sensex lost 362.92 points or 0.93% to close the session at 38,600.34 points, while the broader Nifty 50 shed 114 points or 0.97 % to end at 11,598.25points. The Sensex has given a return of 7.02% between January and now.
Much of the rally in the benchmarks in 2019 — an extremely narrow one driven by about half a dozen stocks—has been fuelled by FPI (foreign portfolio investors) buying.
FPIs have picked up stocks worth nearly $9.7 billion so far in 2019, against an outflow of $4.6 billion last year. On the other hand, between January and now, the domestic institutional investors (DIIs) have sold shares worth nearly $2.5 billion, Bloomberg data showed.
However, India remains one of the most expensive markets in the world. At its close of 38,600.34 on Monday, the Sensex now trades at a price-earnings(PE) multiple of 18.4 times to the estimated one- year forward earnings, against the long-term average PE of 16.7 times.
This compares with 11.5 times for Kospi and 14.8 for Jakarta Composite. Russian equities were the cheapest in the emerging market with a forward price-to-earnings ratio of 5.7, Bloomberg data showed. Historically, Indian equities have traded at an average PE premium of 26% to the Asia pacific region, excluding Japan.
Of the 19 sectoral indices compiled by BSE, all barring BSE Oil & Gas and Telecom ended in the red with the BSE Consumer durables and BSE Metal falling more than 2%.