India, emerging markets sizzle

In Q1 of CY06, India stands 4th with 20 per cent returns.

India, along with three other emerging markets, grabbed the honours in the first quarter of calendar 2006 with an average 20 per cent returns.

During the quarter, Moscow Times of Russia topped the chart with 22.35 per cent returns, followed by OSE All Share of Norway at 20.81 per cent and Karachi 100 of Pakistan at 20.19 per cent. In comparison, the benchmark BSE Sensex stood at the fourth spot with 20.03 per cent returns.

Among the other major markets, while Japan's Nikkei rose 5.89 per cent, Hong Kong's Hang Seng, Nasdaq composite, FTSE 100, and NYSE composite all gained over 6 per cent each. Australia's S&P/ASX 200, Straits Times of Singapore, ISE National-100 of Turkey and AEX General of the Netherlands gained over 7 per cent each.

The only Asian index to lose ground was South Korea's KOSPI, which fell around 1.4 per cent. Though the Sensex has hit record highs in the recent weeks, market players do not expect its sizzling run to continue. On April 10, the index closed at 11662.55 after a day of extreme volatility.

Sandip Sabharwal, chief investment officer (equities), Lotus India AMC, feels India would underperform other emerging markets over the next couple of months since it is already overvalued.

"At a forward P/E of 17, the Indian equity market is commanding a higher valuation compared with the average P/E of 10-13 for other emerging markets. So, in that sense, we might see some cool-off," Sabharwal said.

The view finds favour with Robin Griffiths, head of asset allocation at Rathbones, the UK-based firm that provides discretionary fund management and wealth management services to private clients and trustees.

According to Griffiths, the Indian equity market is now not cheap but the most highly rated on earnings of any so-called emerging market.

"It is worth a premium but not quite the one it has now. The extra strength really is foreign money flooding in and pushing prices up too far too soon," he said.

Griffiths added, "In round numbers, about 12,000 is a top for the Sensex now and actually, there is an outside day reversal pattern there now." Outside day reversal is a two-period chart pattern that suggests a potential reversal or deceleration of the current trend.

According to Sabharwal, rotational rallies will be the order of the day as sectors, which were not part of the rally, find favour among market players.

"Information technology has underperformed the broader indices by 30 per cent or so in the past year. In fact, too many negatives have been factored into the sector overlooking the positives. So, we can expect the sector to catch up with the market," he added.

"But a fallback to 9,000, roughly, is expected. We would then be buyers again on that weakness, but there does need to be a dip," feels Griffiths said. 
 

HOW THEY FARED
Exchange Name	Country	30-Dec-05	31-Mar-06	% change
Moscow Times	Russia	14723.18	18014.22	22.35
OSE All Share	Norway	376.78	455.20	20.81
Karachi 100	Pakistan	9556.61	11485.90	20.19
Sensex	India	9397.93	11279.96	20.03
All shares	Sri Lanka	1922.21	2264.36	17.80
MerVal	Argentina	1543.31	1800.58	16.67
Jakarta Composite	Indonesia	1162.64	1322.97	13.79
Bovespa	Brazil	33456.00	37952.00	13.44
ATX	Austria	3667.03	4139.83	12.89
Shanghai Composite	China	1161.06	1298.30	11.82