India weathers it better

Domestic stocks fell the least among emerging markets in the current subprime turmoil, with an exception to China, which was relatively untouched by the global rout.

Even after considering Thursday's fall of 642 points, Sensex declined by 9.52 per cent from its recorded closing high of 15,868.85 points in July last month, compared to other emerging markets which tumbled in the range of 11-20 per cent.

However, China's Shanghai Composit touched a record high of 4,765.45 on August 14 and shed merely 3 per cent on Thursday.

Commenting on the India story, Naval Bir Kumar, Managing Director, Standard Chartered AMC, maintained that India is a secular growth story and has a better resistance power compared to other emerging markets.

"Its strong domestic growth gives it a sort of insulation from external slowdowns thereby attracting buying interest whenever there is a correction," he said.

However, Kumar points out that markets have moved far beyond the subprime issue and there are also indications about reversal in the yen carry trade, which may act as a new trigger.

In the past couple of weeks, the bout of risk aversion among global funds, trying to retreat from risky assets due to volatile US markets, have triggered a steep fall in the emerging markets.

Kumar says that this phenomena may not last long in the emerging markets and one cannot predict doomsday as funds having exposoure to subprime market in US are just desperate for cash now.

However, presenting a counter view, Andrew Holland, Head Strategist at DSP Merrill Lynch, said that it would be difficult to give specific reasons, under the given circumstances, for falling markets. "For now I can only say that markets would be highly volatile in the coming days as funds would move out of emerging markets," he said.

Treading a cautious view, Holland refused to comment on the US subprime issue and probablity of reversal in yen carry trade. However, another strategist in a foreign fund said that most emerging markets would behave in a brutal manner in the days to come due to continued sale by global funds.

Among the emerging markets, Jakarta Composite was the top loser down 20.67 per cent from its record closing high of 2,401 points, scaled in July last month. South Korea's benchmark Index Kospi was down 16.05 per cent from its high of 2,004 points in July.

Brazil's Bovespa was down 15.21 per cent from its high of 58,125 in July while Hong Kong's Hang Seng was down 12.25 per cent from its high of 23,472 in July. Japan's Nikkie shed 11.76 per cent from its high of 18,261 points, which it touched in July. Russia managed to weather the meltdown. Russia's Moscow Times declined by 9.18 per cent from its record high of 23,051 in July this year.