-A strong case for Indian equities – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-editorial/a-strong-case-for-indian-equities/articleshow/92067340.cms

Synopsis

The number of demat accounts in the country has doubled since the onset of the pandemic, as have assets under control of depositories. A new generation of technology-assisted investors fed savings into a bull market that more than offset what foreign portfolio investors (FPIs) pulled out last year. This, of course, makes Indian stocks relatively expensive in a global market downturn. But the Sensex is trading at a trailing price/earnings multiple lower than the five-year average. Value-buying could stabilise the Indian market if the sell-off in emerging markets intensifies.

Indians are buying into the India story as foreign investors seek a flight to safety. Financial turbulence due to central bank actions and fresh supply disruptions have been cushioned on Dalal Street by domestic retail investor interest that has hoisted Indian equity in the market capitalisation sweepstakes. Indian equity is now valued at 3.1% of the global stock market capitalisation, nearly 30% higher than the long-term average – by eating into the shares of other emerging economies, which have since January lost market value at almost twice the rate of India’s.

The number of demat accounts in the country has doubled since the onset of the pandemic, as have assets under control of depositories. A new generation of technology-assisted investors fed savings into a bull market that more than offset what foreign portfolio investors (FPIs) pulled out last year. This, of course, makes Indian stocks relatively expensive in a global market downturn. But the Sensex is trading at a trailing price/earnings multiple lower than the five-year average. Value-buying could stabilise the Indian market if the sell-off in emerging markets intensifies.

The India story is predicated on its growth, which may be affected by RBI’s interest-rate hiking cycle. Bond yields have raced to fresh highs on the eve of the second anticipated repo rate hike on Wednesday. RBI governor Shaktikanta Das has indicated earlier that rate actions will be structured in a way the growth momentum does not suffer unduly. The fiscal response to elevated inflation, too, indicates demand revival is a priority. Even with some revision to earlier growth projections, India will continue to be among the fastest-growing major economies. That makes a strong case for Indian equities.

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