Data Exhibits - Indian Markets Still Sound, Poised For Growth

After the global financial crisis in 2008, there has been mixed recovery in various major world economies till date. As of now, European leaders are still grappling to resolve the debt crisis. The Chinese and Indian markets are also facing slow economy growth along with lower export growth. However, there are a few economies which have recovered considerably. Hence, we have done some number-crunching to see how the Indian markets have performed compared to the other world markets year-to-date and for the past three years.

Surprisingly, Venezuela’s markets topped the ranking with 105.5 per cent year-to-date (YTD) returns and 77.8 per cent returns in the past three years. However, as per its economy data, the country is facing various macro-economic imbalances resulting from the government’s unorthodox economic policies, a housing crisis and a continuing electricity shortfall. The country’s president, Hugo Chavez, has devalued the country’s currency twice in December 2010 and January 2011. Venezuela’s economy remains highly dependent on oil revenues, which account for roughly 95 per cent of its export earnings - about 55 per cent of the federal budget revenues and around 30 per cent of the GDP.

A contraction of economy in 2009-10 after a sharp drop in oil prices in 2009 and the high government spending created a consumption boom which came at the cost of higher inflation - roughly 30 per cent in 2010. Spain’s market was the worst performing market, losing 23.5 per cent since January 1, 2012. Over the last three years, Portugal, Italy and Spain were the worst performers with -13.7, -12.2 and -11.3 per cent returns respectively. 

As far as the European markets are concerned, major stock markets such as United Kingdom, Germany and Russia grew by 7.3, 7 and 5.4 per cent respectively over the last three years as against India’s Sensex return of only 4.5 per cent. However, India has outperformed with YTD returns of 8.2 per cent as against United Kingdom, Germany and Russia (YTD returns of -2.5, 3.9 and -7.2 per cent respectively). The other European markets such as Italy, Spain and France are still down since the last three years with -12.2, -11.3 and -2.5 per cent returns. Over three years, the markets of Turkey and Denmark topped with 19.4 and 13.2 per cent returns. The YTD returns of these markets also topped with 11.8 and 9.6 per cent respectively.

If we compare Indian economy with American economy, the stock market of the U.S. has recovered remarkably over the last three years, giving returns of 42.2 per cent. However, it has given only a 6.1 per cent return since the beginning of the year, thus underperforming the Indian markets. Still, the U.S. market is the second-highest gainer in both YTD returns and the past three-year returns after Venezuela’s stock market in the American continent. The Brazilian and Canadian stock markets have seen marginal recovery with 0.5 and 2.9 per cent respectively over the last three years but these markets have given negative returns of 4.1 and 3.8 per cent respectively since the beginning of 2012.

Within the Asian economies, the Sri Lankan stock market has topped and given 29.7 per cent returns for the last three years. However, this market has dipped by 21 per cent since January 1, 2012 due political instability. The markets of Thailand, Indonesia and Malaysia have outperformed the Indian markets, giving returns of 23.4, 23 and 13.5 per cent respectively over the last three years. The Japanese and Chinese markets are the worst performing markets in the Asian continent with -8.1 and -6.2 per cent returns over the last 3 years. When we compare the Asian markets since the beginning of 2012, the Indian markets have grown considerably by 8.2 per cent.

In G7 countries, the Indian markets can be ranked third after the United Kingdom and Germany. However, the Indian markets topped with regards to YTD returns within the G7 countries. Among BRIC countries, India too topped considering the YTD returns and stood second, followed by Russia with regards to the last three years’ returns.

The above observations prove that though Indian economy has not recovered considerably (4.5 per cent returns over the last three years), the domestic markets have done remarkably well, exhibiting 8.2 per cent returns since January 1, 2012. Even the Chinese economy is far away as compared to Indian economy in terms of recovery in the stock markets. Hence, we feel that the Indian economy is poised to show good growth over the next couple of years, provided the government can overcome policy paralysis and the current account deficit.