India Shining Streak Continues

The Indian equity market has outperformed major equity markets globally and is near its 52-week high. The quantum of foreign funds flowing into the Indian markets tells us how the world views India as an oasis in the global markets. Remember, till recently, emerging markets used to be considered risky, thus leading to capital outflows whenever the times were turbulent in global economics. Besides equity, India also stands out in terms of resilience it has shown when it comes to currency. 

Even the Government of India’s benchmark 10-year bond yields have outperformed others. At a time when the US bond yield is trading at 11-year high, we are still hovering much below 7.5 per cent. One of the reasons for such outperformance of the bond yield is that there is a good chance that JP Morgan will include Indian government bonds in its emerging market bond index. It will entail a meaningful inflow of around USD 30 billion into Indian bonds in the coming years.

Nonetheless, the biggest beneficiary of all these developments continues to be the equity market. A fall in the bond yield will boost equity valuation as there is an inverse relation between equity market valuation and bond yields. A fall in yield also means lower cost of borrowing for Indian corporates. It becomes very important at the current juncture when we are staring at the capex cycle to begin. The last recorded credit growth was at around 18 per cent. 

This is quite healthy given the fact that India is witnessing an uptick after half a decade of slow credit growth. There is very clear visibility of demand which has given confidence to large corporates to ramp up their capacity. Overall, this is very positive for the economy and it looks like it is India’s shining moment. When the international equity markets are witnessing heightened volatility, the Indian equity market presents a huge opportunity for both Indian as well as foreign investors. 

For investors who believe in margin of safety and want lesser volatile companies as part of their portfolio, it would be wise to choose high dividend yield companies. Our cover story this time covers important aspects of investing in high dividend-yielding companies. To make it practically rewarding, we have included two recommendations that will help you build a portfolio with high dividendyielding stocks. 

In our special story we have discussed at length the investment prospects in the renewable energy space. Indeed, a lot is happening here and we as investors should not fall behind in tapping the new opportunities that this sector has to offer. In another special story of ours, we have highlighted the fresh triggers in the logistics sector in India. Lot of action is expected in the logistics sector in India post the announcement of the National Logistics Policy

This issue also includes a special sector report on engineering in India. This sector is closely aligned to the manufacturing sector and I am very happy to share insights on a sector that is futuristic in nature and holds a lot of promise. To conclude, India today is emerging as a strong growth story to bank on for global investors when the developed markets are going through unprecedented turmoil and economic pains. With several triggers in place for the economy to take off from the current level and with several sectors promising growth at a faster rate, it is time to focus on equity with renewed enthusiasm.

RAJESH V PADODE
Managing Director & Editor