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    In numbers: India has decoupled with world markets, and in the wrong way

    In numbers: India has decoupled with world markets, and in the wrong way

    In numbers: India has decoupled with world markets, and in the wrong way
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    By Prashant Nair   IST (Published)

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    There is quite a bit of chatter among market participants regarding India’s poor performance vis-à-vis global markets.

    There is quite a bit of chatter among market participants regarding India’s poor performance vis-à-vis global markets.
    Here are the simple straight forward numbers –
    2020 returns so far
    MSCI India: (-) 26 percent
    MSCI EM: (-) 17 percent
    MSCI World: (-) 10 percent
    MSCI US: (+) 26 percent
    But the big numbers hide interesting and important details. I looked at the period post the COVID-19 crash. Remember that the crash was mostly uniform across markets ranging between 35-40 percent. World markets bottomed around March 23. I divided the period since the March-lows into 3 phases and looked at data for the major markets around the world.
    Phase 1 – was the ferocious bounce which began on March-23 and lasted till April 30
    Phase 2 – was the inevitable pullback which started from May 1 and lasted till May 14
    Phase 3 – is the renewed move higher across global markets which brings us to the present day
    Below is data for Phase 1. Nifty made a low of 7,511 on March 23 and it closed at 7,801 on the same day. As the data below shows, India’s bounce from March 23 is in-line if not better than most global markets.
    Understanding India's poor performance
    The bounce
    MarketsMarch 23 To April 30
    India31%
    U.S.30%
    U.K.29%
    Germany26%
    Japan24%
    Australia37%
    Brazil19%
    # In Dollar Terms
    Next we come to Phase 2. After the initial big bounce lasting up till April 30, came the inevitable pull back and sideways action in most markets around the world. The Nifty went from 9,860 close on April 30 to a close of 9,142 on May 14. That is a drop of nearly 7.2 percent. The S&P-500 lost 2 percent while the Australian market lost 5 percent. As the table below shows, India was down, but so were all the other global markets. But India lost more than all the other markets, except Brazil.
    Understanding India's poor performance
    The pullback
    MarketsApril 30 To May 14
    India-8%
    U.S.-2%
    U.K.-6%
    Germany-6%
    Japan-2%
    Australia-5%
    Brazil-9%
    #In Dollar Terms
    Now to the final phase. The period from May 14 to the present day. Here the comparison gets stark. India is the only market which is down in this period. The data below is self-explanatory.
    Understanding India's poor performance
    The move higher again (except India)
    MarketsMay 14 to present
    India-1%
    U.S.3%
    U.K.4%
    Germany7%
    Japan1%
    Australia4%
    Brazil11%
    # In Dollar Terms
    So what changed in the last phase? Two things
    On the evening of May 13, the Indian government announced part-1 of its fiscal package. The announcements totaled to Rs 5.94 lakh crore. But the direct fiscal spending was only Rs 12,500 crore. This was underwhelming for a market that had built-in high hopes leading up to that point.
    Then on the May 17, India announced another extension of its lockdown to protect its citizens against COVID-19. This was Lockdown 4.0. While no one expecting a big opening up of the economy, the combination of underwhelming fiscal support plus anther lockdown has meant that markets have sulked since.
    What will also be relevant is the rate of spread of COVID-19. The infection curve in India is yet to flatten. Notwithstanding the risk of a second wave of infection, many parts of the world are re-opening their economies and markets are naturally betting on recovery from near zero activity levels.
    Here is the data all put together in one place.
    Understanding India's performance
    Putting it together
    PhasesThe bounce
    MarketsMar 23 To Apr 30
    India31%
    U.S.30%
    U.K.29%
    Germany26%
    Japan24%
    Australia37%
    # In Dollar Terms
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