According to Jefferies, the benchmark indices of India are proving incredibly resilient against the backdrop of a US economic slowdown. While the Dow Jones Industrial Average had its worst trading day in almost two years on Friday, said Christopher Wood, head of global equity strategy at Jefferies, there were signals of a hard US economic downturn. However, compared with other markets, like Japan, it has been more resistant to the downturn and the subsequent sell-off on Wall Street.
Recent reports indicate that US employers created 114,000 jobs in July, missing the estimate 175,000. However, the jobless rate climbed to 4.3 percent, a near three-year high.
In contrast, India, supported by strong market fundamentals, appears to be much more resilient to such turmoil. This was evident on Monday, while the Indian stock market, along with other Asian markets, rebounded strongly on Tuesday.
Wood emphasized that recent market movements have clearly demonstrated the resilience of the Indian stock market in the face of a US economic downturn and Wall Street sell-offs, especially vis-à-vis Japan. He also pointed out that the rally in India's stock market has really been fueled by domestic money. Wood said, "In fact, 26% of my GREED & Fear global long-only portfolio is invested in India," he said. That's a vote of confidence into the strong demand for equities in the South Asian nation supported by a significant flow of private-equity investments.
Domestic investors have been unabated in their interest in Indian equities. For instance, on Monday, while foreign institutional investors sold stocks worth Rs 10,073 crore, domestic institutional investors lapped up stocks worth Rs 9,155 crore.
Meanwhile, foreign portfolio investors invested Rs 54,727 crore in equity and debt markets last month. For the year-to-date, FPI investment in Indian equity stands at Rs 35,565 crore.
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