India may become top performing global market this month

The surge also comes exactly five years after India imposed a nationwide pandemic lockdown, a day when the Nifty saw losses since the start of the month touch 33%. On Monday, the Nifty rose 1.32% to 23,658.35, while the Sensex rallied 1.4% to 77984.38. However, the Sensex fell short of erasing its losses by 155 points.

The rally from the low in early March, described variously as a trading bounce to a full-fledged recovery, has also boosted India’s performance in global index provider MSCI’s All Country World Index (ACWI).

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“The correction’s done and we could be headed toward the record high made in late September,” said market veteran Ramesh Damani. Despite the ambient noise around a global tariff war, one could “consider investing” in domestic-focused businesses within the mid- and small-cap spaces, Damani said.

Nifty made a record high of 26,277.35 on 27 September last year and fell 16.4% to a nine-month low of 21,964.6 on 4 March.

The Nifty has now rallied 8% from the 4 March low, driven by foreign portfolio investors’ (FPI) provisional buying of ₹3,056 crore, on top of Friday’s buying of ₹5,265.50 crore, and short-covering of index futures positions. NSE data shows that FPIs closed out cumulative shorts worth ₹341 crore on Monday. Short index call positions were also covered, further aiding the rally.

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However, Swarup Mohanty, vice-chairman and CEO of Mirae Asset Investment Managers (India) Pvt. Ltd, believes this to be “a trading market” and that one could consider cost averaging in large- and small-cap spaces while avoiding the costlier mid-caps.

As of Friday, India had outperformed the US, the UK, Japan, China and Canada — which collectively accounted for 80% weight on the MSCI ACWI — in the month through Friday after a prolonged five-month underperformance from late September through February.

By Friday, MSCI India had returned 6.6% compared to MSCI US, which was down 4.7% for the month to 21st, MSCI China (up 4.6%), MSCI Japan (up 4.2%), MSCI UK (-1.6%) and MSCI Canada, which was down 2%. Only MSCI Brazil was above India, returning around 9% for the month.

This contrasts with the five-month period from 27 September last year to 28 February when MSCI India returned a negative 18.6% (3,160.64 on 27 September to 2,574.14 on 28 February) against a positive 2.5% return by the MSCI US, 7.8% positive return by MSCI China and 7.3% positive return by MSCI Canada. Japan fell 2.32% over the period, outperforming India.

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“The uncertainties (global trade war, tepid quarterly earnings) linger but there is room to average in certain segments within the large- and small-cap spaces. We remain fully invested and favourably inclined to banking, healthcare, among other areas,” Mohanty of Mirae Asset said. His caution is reflected by fear gauge India Vix surging 9%, a two-and-a-half-month high, to 13.7. Vix tends to rise as uncertainty grows among traders and falls when the uncertainty decreases.

In the current calendar to 4 March, Nifty plumbed 1,562 points from a closing of 23,644.8 on 31 December to 22082.65 on 4 March. The Nifty has covered up all those losses, gaining 1,576 points over 13 sessions since then.

On Monday, HDFC Bank, Reliance Industries, Kotak Mahindra, State Bank of India and ICICI Bank contributed over half of Nifty’s 308-point rally.

“It would be reasonable to assume that the lows made in the first week of March could be the near- to medium-term bottom for the year,” said Aniruddha Sarkar, CIO, Quest Investment Managers.

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“Though nothing has fundamentally changed in three weeks, valuations have started to look attractive for Indian markets. The FIIs selling earlier were primarily hedge funds. Long-term sovereign wealth fund and passive money continues to flow to India. With the dollar index falling from 110 in February to 104 now, the rupee appreciating from 88 to 85.5, the US economy showing signs of weakness and the Fed signalling higher inflation, the situation for India is comparatively better. A lot of FII short-covering on derivatives is evident over the last one week, driving sentiments on the positive side,” he added.

All sectors closed in the green, with Nifty PSU Bank and Nifty Private Bank leading with gains of 3.18% and 2.4% each. Market breadth was positive, with three out of five stocks gaining on NSE.

(Srushti Vaidya contributed to this story)