Indian stocks may continue with their relative outperformance over global peers in Samvat 2079, but a complete decoupling from global developments is unlikely, suggests a BT Digital Diwali Survey.
Analysts said India’s economy is faring better than peers and that domestic flows have so far absorbed large foreign outflows seen in the last one year.
“A total decoupling is not possible, as a few sectors, which are big drivers of earnings here, are export-driven. However, India’s outperformance may continue,” said Vinit Bolinjkar, Head of Research at Ventura Securities.
Siddarth Bhamre, Head of Research at Religare Broking said the US and the EU are still struggling with inflation and slowdown and that China has its own problems related to housing and Covid-related restrictions.
“Indian economy, on the other hand, is expected to report growth rate around 7 per cent. Valuation-wise we may not be attractive, but market participants would be willing to pay a premium for India’s earnings visibility and growth,” Bhamre said.
India’s correlation with that of US stock market stands around 0.7-0.8 times and, therefore, it would be wrong to assume that it has de-coupled, said Surjitt Singh Arora, Portfolio Manager at PGIM India PMS.
“While risks emanating from global events and geopolitical actions are not ruled out, we reckon India is in a relatively good stead,” Singh said.
Sanjay Chawla, CIO for Equity at Baroda BNP Paribas Mutual Fund said one needs to make a distinction between economies and markets. Given the interlinkage of economies via trade, crude, commodities and broader flow of capital, said he, it is impossible to be completely decoupled.
Chawla noted that several central banks around the world are forced to raise rates to defend their domestic currency following the US Fed rate hikes.
“When one comes to equity markets, the good part for India is the rising power of domestic capital flows. A powerful combination of strong SIP (systematic investment plans) inflows, NPS & EPFO flows has mitigated the shocks for our markets relative to other markets,” he noted.
For the first none months of 2022, FII’s have sold Rs 1.55 lakh crore of equity while DIIs have added nearly Rs 2.48 lakh crore of domestic equity during the same period.
This, Chawla said, has been above absorb this large selling restricting the market fall to a large degree.
Nifty and Sensex have corrected roughly 5-6 per cent in Samvat 2078. This is against significant fall of over 15 per cent in markets across Europe and the US.
Shrikant Chouhan of Kotak Securities said strong GST collections of Rs 1.47 lakh crore in September, housing sales growth of 49 per cent YoY in eight major cities in the first half of FY23; a September manufacturing PMI reading of 55.2 and credit growth of 16.2 per cent, are all suggesting that India is holding up well.
“India will find it difficult to decouple from global market, but it will fare well because the economic prints here are strong,” said Deepak Singh, Chief Business Officer at Reliance Securities. Credit growth in India is at a 9-year high while the corporate debt-to-GDP is also at a 15-year low, reinforcing optimism, he said.
Deepak Jasani, Head of Retail Research at HDFC Securities said: “Decoupling of Indian stocks from the global trend cannot last forever. In case the global bearishness becomes deeper, India will fall in line with it at some point. It’s just that India has some ability to run on its own for some time; but dependence on globe for flows and trade remains,” he said.
Sumit Chanda, Founder and CEO of JARVIS Invest said there is absolutely no reason why India should not outperform our global peers. “Domestic flows continue to remain strong and that could act as a meaningful shock absorber of FII selling. If the domestic flows continue, to that extent, it is expected to see the market being more resilient versus others over the course of the coming year,” he said.
Vinod Nair of Geojit Financial Services India said to the Indian stock market outperforms the rest of the world due to its stable domestic economy.
Sunil Nyati, Managing Director at Swastika Investmart, said India’s stock market is still majorly dependent on FPIs and while their influence is decreasing due to strong domestic flows and retail participation, any significant Fed rate hike will lead to FPIs fund outflows. impacting the Indian stock market at least in the short term. However, in the medium to long term time horizon, we are extremely constructive on the Indian stock markets.”