The Hindu Business Line : Emerging markets outdo developed peers

The Indian stock market may now be moving in step with the Dow Jones, but did you know that markets such as India remain well above their 2003 levels? The developed markets, in contrast, have erased almost their entire gains from 2003.

In early 2003, most world stock market indices had bottomed out, following the pricking of the dot-com bubble. The bull run from that low lasted until late 2007 in developed markets, with emerging markets participating as well. For a few emerging markets such as India and Indonesia, the bull run prolonged till early 2008.

In the meltdown that has followed, indices such as the Nikkei, FTSE 100 and America’s Dow Jones Industrial have erased much of the gains from 2003 levels. Whereas, indices in emerging markets such as Jakarta and Brazil and India have retained the gains.

From the 2003 trough to peak, emerging markets’ indices gained as much as six fold driven by fund flows even as developed markets moved up at a more sedate pace. For example, the Dow Jones, FTSE 100 and Nikkei gained 91 per cent, 106 per cent and 140 per cent, respectively, from 2003 low to their late 2007 peak. Emerging market indices witnessed extraordinary gains — Jakarta Composite, Brazil’s Bovespa and the India’s Sensex gained 652 per cent, 641 per cent and 630 per cent, respectively.

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