Description
The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.
India Equity Market Flash
February 2012
Solid gains for the MSCI India Index
The MSCI India Index USD registered the fourth highest monthly gain ever in January, rising 21% over the month. Equity market gains were accentuated in the USD index due to an historically high monthly Indian rupee (INR) appreciation of 6.8% versus the US dollar. News flow from developed economies, particularly the US, remained supportive of higher risk assets. The increased likelihood of a continuation in the quantitative easing cycle by the ECB also fuelled equity gains. The macro picture in India also incrementally improved, with December inflation falling below 8% and the Reserve Bank of India (RBI) starting the easing cycle. Government policy also appeared to take a turn.
appears to be greater resolve to fast track infrastructure investments, particularly in the Road, Power and Coal sectors. Consensus has also been reached with state governing bodies on a ‘Negative List’ of services to be taxed.
Consumption and infrastructure trends
Consumption is holding up well, with rural demand the main driving force. In addition, banks are not seeing delinquencies in their retail portfolios, so urban incomes are not stretched. Infrastructure trends are mixed; old projects are facing problems and creating stress for banks. However, project pipelines are gradually getting filled, with road contracts leading the way. Whether or not this can change will depend largely on global oil prices, which will directly impact India as the country is a net oil importer.
Inflation moderates
In December, Wholesale Price Index (WPI) inflation reached 7.5%, dipping below 8% for the first time in two years. The fall was largely on account of a favorable base effect and easing food price inflation. However, core inflation appears to be doggedly sticking to current levels for the time being.
Strong export growth Foreign Institutional Investors (FIIs) aggressive buyers in January
FIIs bought a significant volume of equities over the month, totaling around US $2 bn. Domestic investors sold US $1.3bn over the same period. Insurance companies and mutual funds sold US $937m and US $381m, respectively. Other key developments over the month:
n I ndustrial
RBI kicks-off monetary easing
In the January quarterly credit policy meeting, the RBI commenced monetary easing with a Cash Reserve Ratio (CRR) cut of 50 bps. While hinting at continued easing, the Central Bank opined that the timing and extent of cuts in benchmark rates would be dependent on the trend in inflation and fiscal consolidation. Government policy with regard to nondomestic investor access to capital markets also appeared to be evolving: International investors are now being allowed greater access to the Indian market via the Qualified Financial Investor (QFI) route and the procedure for block deals has been simplified. There
Export growth rates are looking decent. The one major challenge India faces on the macro front is its rising fiscal deficit, which hinders the government’s ability to spend on capacity creation in the economy.
Supportive valuations
Valuations have become progressively more attractive over the past few months, and we have seen many investors start to invest much more aggressively so far in 2012 n
Production (IP) for November recovered and grew at 5.9% oya year Treasury yield decreased 30 bps to 8.27% appreciated a significant 6.8% vs. the USD
n 1 0
n I NR
PineBridge Investments is a group of international companies acquired by Pacific Century Group from American International Group, Inc. in March 2010. PineBridge companies provide investment advice and market asset management products and services to clients around the world. PineBridge Investments is a service mark proprietary to PineBridge Investments IP Holding Company Limited. Services and products are provided by one or more affiliates of PineBridge Investments. Certain information may be based on information received from sources PineBridge Investments considers reliable; PineBridge Investments does not represent that such information is accurate or complete. Certain statements provided herein are based solely on the opinions of PineBridge Investments and are being provided for general information purposes only. Any opinions provided on economic trends should not be relied upon for investment decisions and are solely the opinion of PineBridge Investments. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements that do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein are valid only as of the date of this document and are subject to change. PineBridge Investments is not soliciting or recommending any action based on any information in this document. PineBridge Investments Europe Limited is authorised and regulated by the Financial Services Authority (“FSA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FSA Handbook and has been approved by PineBridge Investments Europe Limited. The information provided herein is for informational purposes only. We are not soliciting or recommending any action based on this material. There is no assurance that forecasts will be attained.
doc_372434941.pdf
The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.
India Equity Market Flash
February 2012
Solid gains for the MSCI India Index
The MSCI India Index USD registered the fourth highest monthly gain ever in January, rising 21% over the month. Equity market gains were accentuated in the USD index due to an historically high monthly Indian rupee (INR) appreciation of 6.8% versus the US dollar. News flow from developed economies, particularly the US, remained supportive of higher risk assets. The increased likelihood of a continuation in the quantitative easing cycle by the ECB also fuelled equity gains. The macro picture in India also incrementally improved, with December inflation falling below 8% and the Reserve Bank of India (RBI) starting the easing cycle. Government policy also appeared to take a turn.
appears to be greater resolve to fast track infrastructure investments, particularly in the Road, Power and Coal sectors. Consensus has also been reached with state governing bodies on a ‘Negative List’ of services to be taxed.
Consumption and infrastructure trends
Consumption is holding up well, with rural demand the main driving force. In addition, banks are not seeing delinquencies in their retail portfolios, so urban incomes are not stretched. Infrastructure trends are mixed; old projects are facing problems and creating stress for banks. However, project pipelines are gradually getting filled, with road contracts leading the way. Whether or not this can change will depend largely on global oil prices, which will directly impact India as the country is a net oil importer.
Inflation moderates
In December, Wholesale Price Index (WPI) inflation reached 7.5%, dipping below 8% for the first time in two years. The fall was largely on account of a favorable base effect and easing food price inflation. However, core inflation appears to be doggedly sticking to current levels for the time being.
Strong export growth Foreign Institutional Investors (FIIs) aggressive buyers in January
FIIs bought a significant volume of equities over the month, totaling around US $2 bn. Domestic investors sold US $1.3bn over the same period. Insurance companies and mutual funds sold US $937m and US $381m, respectively. Other key developments over the month:
n I ndustrial
RBI kicks-off monetary easing
In the January quarterly credit policy meeting, the RBI commenced monetary easing with a Cash Reserve Ratio (CRR) cut of 50 bps. While hinting at continued easing, the Central Bank opined that the timing and extent of cuts in benchmark rates would be dependent on the trend in inflation and fiscal consolidation. Government policy with regard to nondomestic investor access to capital markets also appeared to be evolving: International investors are now being allowed greater access to the Indian market via the Qualified Financial Investor (QFI) route and the procedure for block deals has been simplified. There
Export growth rates are looking decent. The one major challenge India faces on the macro front is its rising fiscal deficit, which hinders the government’s ability to spend on capacity creation in the economy.
Supportive valuations
Valuations have become progressively more attractive over the past few months, and we have seen many investors start to invest much more aggressively so far in 2012 n
Production (IP) for November recovered and grew at 5.9% oya year Treasury yield decreased 30 bps to 8.27% appreciated a significant 6.8% vs. the USD
n 1 0
n I NR
PineBridge Investments is a group of international companies acquired by Pacific Century Group from American International Group, Inc. in March 2010. PineBridge companies provide investment advice and market asset management products and services to clients around the world. PineBridge Investments is a service mark proprietary to PineBridge Investments IP Holding Company Limited. Services and products are provided by one or more affiliates of PineBridge Investments. Certain information may be based on information received from sources PineBridge Investments considers reliable; PineBridge Investments does not represent that such information is accurate or complete. Certain statements provided herein are based solely on the opinions of PineBridge Investments and are being provided for general information purposes only. Any opinions provided on economic trends should not be relied upon for investment decisions and are solely the opinion of PineBridge Investments. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements that do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein are valid only as of the date of this document and are subject to change. PineBridge Investments is not soliciting or recommending any action based on any information in this document. PineBridge Investments Europe Limited is authorised and regulated by the Financial Services Authority (“FSA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FSA Handbook and has been approved by PineBridge Investments Europe Limited. The information provided herein is for informational purposes only. We are not soliciting or recommending any action based on this material. There is no assurance that forecasts will be attained.
doc_372434941.pdf