Indian stock market worst performing despite recent recovery

Even after growing by nearly seven per cent in the March-April till date period driven by healthy foreign fund inflows, the Indian stock market is yet to catch up with its emerging market peers and is still the worst performing equity market, says a report.

The BSE benchmark index Sensex has lost 13 per cent between December 31, 2010 and February 28, 2011 on the back of worries emanating from corruption, disruption and non-functioning of the parliament, rapidly rising inflation in essential articles (food and fuel) and growing unrest in the Middle East and North Africa region.

However, it managed to reverse the downward trend and gained over 10 per cent from February 28 to April 13, 2011. "The market has done well especially in March bolstered by heavy FII flows. But, it has not yet caught with the emerging market peers. The Indian market is still the worst performer till date even below Japan (Nikkei),"a report by MAPE Securities Private Limited said.

Globally, equity markets have been rising even under the shadows of Middle East unrest, rapidly rising commodity prices, continuing downgrades and bailouts in the EU, catastrophe in Japan and continued fragility of recovery of the US and European economies, it said. The emerging markets performed well in the year till date where Russia, China and Thailand markets were among the top five major markets. However, India and Brazil among BRIC and emerging markets were down during the Q1 2011, the report added.

Japan was the worst performing market in the year so far but, still has been better than India. The earthquake led to severe damage to the industrial infrastructure in Japan besides causing nuclear radiation from a nuclear plant, it said.

The study believes that the recent improvement in FII flows into the country as well as Indian equity markets performance were a result of positive factors. They included a favourable Union Budget (FY12), attempt to curb central government's fiscal deficit in FY12 to 4.6 per cent of GDP and new FDI deals such as BP-Reliance Industries, Nippon-Reliance Capital and Vodafone-Essar. It noted that key domestic positive triggers for the Indian markets over the next three-months would be 18-20 per cent growth estimate for corporate earnings for FY12, (IIP) growth in 7-9 per cent range for FY12, moderation in WPI inflation levels to 7 per cent range by June 2012 and peaceful elections in four-states and a union territory.

Meanwhile, the report feared that any major slowdown on earnings may impact the market negatively from present levels. The report also highlighted some of the risks for the Indian markets which include continuing global social unrest, sustained high levels of crude prices and continued enhancements in global food prices.