Investors continue to trust Indian market’s resilience despite Covid-19 ravages and its impact on economy

Even as several states remain in lockdown, equity markets in India have shown remarkable resilience and India remains a favorite destination with global investors.

The S&P BSE Sensex declined by 1.45% on a total return basis in the month of April 2021.

In an article published in Financial Express, fund manager, Equity, Quantum Mutual Fund Sorabh Gupta noted that on a trailing 12-month (TTM) basis, the index has returned 46.26%. A favorable base of April-May 2020 is reflected in the TTM return.

The S&P BSE Sensex performance was worse than developed market indices such as S&P 500 and Dow Jones Industrial Average which appreciated by 5.2% and 2.7%, respectively during the month.

Gupta noted healthcare and metals were the winning sectors last month. Resurgence of Covid-19 has brought the focus back on healthcare whereas metals have reacted positively to the up move in global commodity prices.

Capital goods and real estate stocks underperformed, as state-level lockdowns made investors nervous about its impact on near-term business prospects, he said.

Indian equities have seen $1.6bn of net selling by foreign investors in April. This is the first time after September 2020 that FPIs have turned negative every month.

On a YTD basis, FPI inflows stand at $5.5 bn. DIIs have been buyers in the month of April.

He further said India’s economic recovery can face near-term headwinds due to the Covid-19 second wave and ensuing lockdowns, this might result in short-term FII hedge funds pulling out capital from Indian markets.

However, in the medium and long term, India’s nominal GDP growth will look better than the western world. This makes it a sought-after destination for yield and growth-seeking long-term global investors.

Lastly, the author said that the resurgence of Covid-19 and ensuing lockdown on economic activity gives a sense of déjà vu. The difference this time being equity markets have shown remarkable resilience.