The Signal: The World Is Buying Into India. Are You?

2020 is coming to an end and judging by the health & wealth of the markets, so are investor woes. 

After a year of mass pains, markets have managed to deliver mass-ive gains. Trading near all-time highs, the year-end is so dichotomous to the months prior. 

To understand just how different today has been from yesterday, look at the table below highlighting market returns territory in the last 3 months on a weekly basis:

As can be seen, markets continue to adapt and improvise vs the worries of the viral virus. From dabbling in-between red and green on weekly basis, markets closed in green in the entirety of last month.

More so, even when markets closed in red, they bounced back immediately giving 5%+ returns on all occasions in last 3 months.

To sweeten the affirmations of the newfound strength, markets closed every day in December 2020 on an All-time high!

From complete fever to new-found and sustainable fervor, markets continue to adopt and become adept versus mishaps of the virus.

Amongst the new-found positives, there are few who continue to wear fear. Acknowledging the tearing of economic health in past, it is in markets’ prerogative to factor in the future. 

The divide in perception continues to be the root cause of concern.

To address market’s “Christmas Has Come Early This Year” mood, let us take a glance at the charts below highlighting the key positives driving and validating current market levels:

The magnetic combo of macro + micro boom has helped markets formulate a pseudo-vaccine to balm the banes away. 

The unprecedented support from the govt. and its banker via their policies and packages continue to augur supportive pillars for growth and instill confidence in near-term sustainability.

Key announcements in “Atamnirbhar Bharat”, Product-Linked Incentives (PLIs), and scaling up the “Ease Of Doing Business” rank merits the rejuvenation in key economic indicators of IIP, PMI, GST Collections and Surplus balances. 

RBI followed its bark with bite by maintaining an accommodative stance through the tide. RBI continues to drive liquidity and stability via special OMOs and keeping borrowing costs at record low levels. 

The harmony between the 2 bodies and growing fundamental of the country has seen revived vigor by foreign monies in the country.

India is on track to record the highest foreign flows on record, curtesy of aforementioned observations.

Below is a graph highlighting the direction of foreign money flows into emerging markets across time horizons:

As can be seen, foreign flows have found favouritism in India, with India being only country to receive positive FII flows across all time horizons.

When looking the inflow/outflow ratio circa FY2020, India leads the pack at 72% FII flows, thus outperforming the 2nd by ~2.5x multiple!

When charting the H1FY21/H1FY20 FII flows, India again tops the ranks by registering a ~650% growth, thus outperforming the 2nd by ~5.5x multiple!

Investments into printing India’s future via FDI flows has followed suit like in case of FII investments in Indian companies. 

The table below highlights the quantum of FDI flow into in country on FY21YTD basis and sectors garnering said interest:

As can be seen, foreign monies continue to map India as their favorites by directing flows into all factions of Indian society.

India is today being touted as the next “manufacturer of the world” and is recognized as the biggest vaccine maker globally. 

In times like these, the demography, supportive policies, and expedited adoption to new normal has shaped India become the hotpot for investments.

Hence, all factors considered, it is fair to say that markets have enough gas in the tank to drive over the next bump and continue moving forward. 

Think of the markets as a vehicle coming fresh off from the auto repair shop. With servicing charges factored in, it is time to strap the belts and put the pedal to the metal

In hindsight the market hysteria looks cushioned. 

In foresight, global and domestic cues continue to spring a long-awaited wave of optimism in Indian equities. While structural challenges are being resolved gradually, Indian equities seem to be on a strong upwards trajectory.

You as an investor should utilize this opportunity to step-up systematic investment/transfer plans (SIP/STPs) by a moderate degree. 

Those feeling adventurous can look to cue up their risk profile by a hierarchical step. 

The same can be done by gentle and gradual allocation into mid-cap and small-cap equities.

With this we conclude our 2 cents on the market’s happenings.

As always, feel free to write to us to share your thoughts/observations on market’s makings-&-takings.

Till next time, wish you a Happy Weekend