While hardly news to the cognoscenti of Dalal Street and Planet Desiwalla, India’s stock market has been on a roll and it seems as if everyone of the 330 million gods in the Hindu pantheon were cheerleaders for its bullish macro ballast. If James Bond has a license to kill, India is a license to make money since the end of the near biblical macro havoc of the pandemic. After all India was one of the few EMs other than commodities exporters like Brazil, Indonesia, Saudi Arabia and UAE to make money for investors in 2022, the latest annus horribilis for global markets.
In fact the last 3 years have been pure Laxmi yog in India as the retail investor has gone ballistic on the stock market and tripled his/her/its participation while offshore fund managers, horrified by China’s property black hole and President Xi’s policy tirades against E-Commerce/Big Tech have put money in Mumbai after saying goodbye to Shanghai. Modi’s rupee demonetization was also an epic steroid shot for India’s financial flows into the capital market and a surge in the bank deposit/GDP ratio. Digital India, Alisha Chinoy’s Made in India, the Aadar revolution and 7.2% GDP growth in the planet’s 5th largest economy, all converged to make India the jewel in my EM crown other than my beloved, sensual Brazil. Blame it on Rio, Sonia Braga, Heidi and the magic of the Samba drums in Carnival!
Yet all is not hunky dory in the Indian stock market. Valuations are a nosebleed 21X forward earnings in MSCI India, more than double the case in China and Brazil as well as at a steep 40% premium to the wider EM constellation. True, India has always traded at a premium to EM indices ever since I first recommended the country in my Dubai newspaper columns in 2002 at Sensex 3000 for myriad reasons that make total investment sense. Yet I have also seen Indian equities get slammed when the global macro gods turn ugly, as happened in the fateful autumn of 2008 when the Sensex lost it 65% of its value and the 2013 taper tantrum/Fragile Five currency crisis when the rupee was shredded into paneer tikka. In fact, as an AED/USD investor, I must point out that INR lost 10% of its exchange value last year but the Reserve Bank has got the message with its tough love monetary tightening.
Since foreign trade is now 20% of the Indian GDP and Brent crude is $90 on the eve of another deadly war in the Middle East, the risk of a global recession is a sword of Damocles on Nifty’s best and brightest. My desi beauty of the year was TATA Motor’s stellar 65% rise. Who would have thought that Ratan Tata’s financial alchemy would turn Jaguar and Land Rover into the world’s best known Indian luxury auto brands.
Also published on Medium.
