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Our Bureau

Chinese, Mexican markets overtake India in May performance

Mumbai June 8 The Indian equity market has outperformed the markets of both emerging and developed nations for the past three months, growing at 25.87 per cent, according to the Standard and Poor's May Global Stock Market Review.

Other key emerging economies also grew during the past three months, posting average returns of 13.83 per cent.

The Chinese market gained 16.82 per cent while the Mexican stock market appreciated by 24.41 per cent. South Africa saw its equity market rise 11.48 per cent.

However, May saw the Chinese and the Mexican markets post gains higher than the Indian market.

"The valuations of Indian stocks vis-à-vis Chinese stocks is still cheaper and thus, we are seeing higher foreign inflows to India," said Mr Lalit Thakkar, Director (Research), Angel Broking.

Market analysts said that the Indian markets showed good returns on account of improved performance of Indian corporates along with the appreciating rupee, which has led to higher inflows from foreign investors to the Indian economy.

Corporates have continued to show improvement in profits. Last quarter, they posted 35-40 per cent higher profits, which improved the market sentiment. Analysts said that the FII flows may reduce in the coming months as the rupee has started to depreciate.

"In the current rally, FIIs were able to get more returns, with the rupee gaining over eight per cent in three months.

"They parked over $4 billion in the equity markets," said Mr Jayant Pai, Vice-President of Parag Parikh Financial Advisory Services Ltd. The analysts also said that most markets are now seeing a cyclical downturn; also, the Indian markets have started showing signs of weakening, indicating that the current gains trend may not continue.

An S&P release said: "The world's emerging and developed markets continued to post positive returns in 2007."

Quoting Mr Howard Silverblatt, Senior Index Analyst, it added: "World equity markets continued to prosper in May, pushing the S&P 500 to a record high close.

"In fact, their performance over the past 12 months has been nothing short of phenomenal, with the average equity market gaining 46 per cent."

In May, 21 of the 25 emerging markets posted positive gains, averaging 6.39 per cent.

In the developed world equity markets, 24 out of 27 markets posted gains with average returns of 3.99 per cent.

As per the report, the world interest rates increased for the month, with People's Bank of China, Bank of England and Norway increasing their interest rates.

"The hardening of interest rates in other countries will be good for the Indian economy, as external borrowings will come down and the exports of Indian companies will not be hit," said Mr Thakkar.

Related Stories:
India among top Asia picks: S&P global survey
`Indian markets remain a compelling one for global investors'

More Stories on : Stock Markets | Credit Rating

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