Indian markets off to a slow start among BRICS countries in 2014

Domestically, last year's outliers IT and Pharma are once again emerging as the frontrunners

2014 might turn out like 2013 in many ways if the first trends are any indication. As foreign investors start afresh in their allocations, it seems other south-Asian markets are better placed than India going into 2014.

The Indian markets are off to a slow start among all BRICS nations, having gained just 0.45% in the first few two weeks of 2014 (year to date). In 2013, the Indian markets posted gains of 8.9%. Extrapolating from the first trends, it seems like the Indian markets could post gains of around 12% in 2014, a shade better than 2013.

Among BRICS nations, the country that surpassed India is South Africa, which saw its JSE Africa index increasing 1.12% (ytd) due to a strong domestic economy. But the rest of the three BRICS countries haven’t been able to post positive gains. Brazil, Russia and China are deep in the negative, with Brazil losing -2.4% so far this year, Russia -1.49%, and China -4.36%.

Closer home, the markets of Sri Lanka and Pakistan are outpacing the Indian markets and seem to be favourites among investors, posting returns of 4.3% and 5.8% respectively. Extrapolating these initial numbers into the next year could see them outperforming India by a long mile. In 2013, Karachi 100 index returned 49.4%, as compared to BSE Sensex which gained 8.9%. However, Sri Lanka’s Colombo All Share Index lagged with returns of -4.78% in 2013.

Back home, it’s once again the familiar situation as last year, with the frontline IT and Healthcare indices posting positive gains in 2014, among all other BSE indices. BSE IT index is up 6.2%, while BSE Healthcare is up 2.2%. Like last year, IT and healthcare seem to be the favourite places where investors want to park their money. In 2013, BSE IT and BSE Healthcare gained 59.8% and 22.6% respectively.

But foreign investors are ignoring all the other major sectors in the market. Going by the BSE’s performance so far this year, BSE Power and BSE Capital Goods indices were the biggest losers at 5.9% and 5.3%. These sectors were among the laggards in 2013.

Among the other sectors that had done well last year - that of FMCG (11) and Auto (7.3) - have started the year on a negative note, with returns -0.35% and -1.9% respectively. Analysts attribute this to higher valuations in these sectors.

Globally, most equity markets have started on a positive note, with about four in five countries starting on a positive note. However, frontline indices such as Dow Jones and Japan’s Nikkei have seen a drop of -0.57% and -3.3%.