MUMBAI: Indian stocks have started to outshine their emerging-market counterparts following a brief spell of underperformance between December 2022 and March 2023, with the Morgan Stanley Capital International (MSCI) India Index trading at an 8-month high premium to the MSCI Emerging Market Index.
On June 1st, the MSCI India Index premium increased to 114.75%, the largest level since September 12. The premium continuously increased from 92.74% on March 29 to the level on June 1. As a result, the Nifty 50 index, which tracks these indices and purchases the underlying equities from regional stock exchanges, increased by 8.2% over the same time period, from 17,080.70 to 18,487.75.
On June 1st, the MSCI India Index premium increased to 114.75%, the largest level since September 12. The premium continuously increased from 92.74% on March 29 to the level on June 1. As a result, the Nifty 50 index, which tracks these indices and purchases the underlying equities from regional stock exchanges, increased by 8.2% over the same time period, from 17,080.70 to 18,487.75.
According to market experts, Indian businesses' emphasis on domestic markets has protected them from the global slowdown brought on by rising interest rates and the effects of the war in Ukraine. According to them, the outperformance of the Indian market will be fueled by the nation's resistance to a global recession as well as the China-plus-one strategy of many multinational corporations.
"The Indian economy is in fine fettle, reflected by the GDP [gross domestic product] number beat," said U.R. Bhat, the director of Alphaniti and advisor to foreign portfolio investors. "Most economies in emerging markets are export-driven and have been impacted by the US slump. In addition to the financial services sectors, equities in fast-moving consumer goods, cement, and capital goods will continue to outperform the market in India for as long as the global economic slowdown brought on by interest rates persists.
The increase in the premium also signals a rise in the price at which Indian stocks are valued.
Santosh Pandey, president and head of Nuvama Professional Clients Group, stated that the MSCI India Index is trading at a 115% premium to the MSCI EM Index in terms of price-to-earnings (PE).
According to data, the India index is trading at 23.06 times while the MSCI EM trailing 12-month PE ratio is now around 10.75 times.
Due to the purchase of Indian shares by overseas investors, foreign portfolio investment reached a nine-month high of $5.3 billion in May. After the Nifty reached a low of 16,828 in March, foreign portfolio investors (FPIs) started to buy. It came after sales totaling $4.1 billion in both January and February.
The 114 members of the MSCI India Index represent about 85% of the Indian equity market. Reliance Industries Ltd., with the highest weight of 10.16%, HDFC Ltd., ICICI Bank Ltd., Infosys Ltd., Tata Consultancy Services Ltd., Hindustan Unilever Ltd., Bharti Airtel Ltd., Larsen and Toubro Ltd., and Infosys Ltd. are the top shares listed on the index by weight as of April-end.
1 377 equities from 24 EM nations make up the MSCI EM Index. Tencent Holdings Ltd, Samsung Electronics Co. Ltd, Alibaba Group Holding Ltd, Reliance Industries, Taiwan Semiconductor Manufacturing Co. Ltd, and others are in the top 10.
The MSCI All Country World Index, which comprises 2,933 equities from countries such the US, UK, France, Japan, and Singapore among developed markets, and from India, China, and Indonesia among emerging markets, is one of the most well-known global index providers. Country indices like the MSCI India Index are also included. Exchange-traded funds and index funds, which put money into stocks that track the index, keep track of these indices.
About MSCI India Index: The MSCI India Index is a widely recognized benchmark for the Indian equity market. It is part of the MSCI (Morgan Stanley Capital International) series of indices, which are designed to measure the performance of various equity markets worldwide.
The MSCI India Index tracks the performance of large and mid-cap companies listed on the Indian stock exchanges. It includes stocks from various sectors such as financials, information technology, consumer goods, healthcare, and more. The index is market capitalization-weighted, which means that larger companies have a greater impact on its performance.
Investors and fund managers often use the MSCI India Index as a reference point to evaluate the performance of their Indian equity investments. It provides a comprehensive view of the Indian stock market and serves as a benchmark to assess the performance of Indian equity funds and portfolios.
The MSCI India Index is periodically reviewed and rebalanced to ensure it reflects the current composition and market dynamics of the Indian equity market. It is widely followed by global investors and serves as an important tool for analyzing and comparing the performance of Indian stocks with other markets.
It's important to note that the MSCI India Index represents the performance of the broader Indian equity market and does not include all Indian companies. It provides investors with a way to gain exposure to a diversified portfolio of Indian stocks, helping them track the performance of the Indian economy and make informed investment decisions.
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