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India Strategy
Retrospective June 2011 – Good Month But Bad Year,
Thus Far
June Retrospective in Summary
• India outperformed the global indices for the 1
st
time in three months.
• During the month, India was the third best performing emerging market and the 2
nd
best
performing Asian market (after Malaysia).
• Year-to-date, India retained its bottom 4 ranking (18
th
position) among emerging markets.
• The mid-cap and small-cap indices underperformed the Sensex during the month.
• Telecoms, followed by Consumer staples, were the best performing sectors while Energy
was the worst performing sector.
• FIIs and domestic institutions were buyers of equities during the month.
• Breadth rose MoM, up 23%.
• Average implied volatility fell to a 9-month low.
• At the end of June, India traded at a 56% premium to the MSCI EM.
Retrospective June 2011 – Good Month But Bad Year, Thus Far
Sector performance: Telecoms was the best performing sector
while Energy was the worst during the month. Year-to-date,
Telecoms remains the worst performing sector and Consumer
Staples, the best. For the emerging markets, Staples was the
best sector (for India, this was the 2nd
best) while Technology was
worst (for India, this was the 4th
best performing sector). Sector
rotation breadth remained moderate with five sectors changing
relative positions MoM while sector rotation depth fell further.
Institutional flows: In June, FIIs turned buyers of Indian equities.
They purchased ~$700 mn in cash and ~ $400 mn in the futures
market. Domestic institutions were marginal buyers (at ~ US$
10mn). Domestic mutual funds remained buyers for the 2nd
consecutive month (at ~ $260 mn) while domestic insurance
companies turned sellers (at ~$250 Mn). Since the start of 2011,
FIIs have bought ~ US$ 500 mn worth of stocks while domestic
institutions have bought ~ US$ 3.2bn worth of stocks.
Equity market activity: Market activity was moderate during the
month MoM. While cash volumes rose 6% MoM, cash turnover
fell further to a 28-month low. Volumes in the derivatives market
were down MoM. Inter-day and intra-day volatility fell further, but
recovered marginally by the end of the month. Even as the
implied volatility rose MoM, the average implied volatility fell to a
9-month low. The average open interest remained unchanged.
Breadth rose MoM, up 23%. The put-call ratio fell 7% MoM after
rising 23% in the previous month.
Currency: The INR appreciated vs. USD as well as Euro this
month. Over the past 12-months INR has appreciated by 4%
against the USD while it has depreciated 12% vs. the Euro YoY
Valuations: After touching a 2-month low last month, MSCI
India’s absolute and relative valuations rose MoM. India traded at
a 54% premium to EM at the end of June.
Corporate Activity: Debt issuances decelerated for another
month. Notably, M&A activity saw further acceleration during May.
Bond Market: The yield curve flattened MoM. It touched its lowest
point since Dec 2008. The 91-day yield touched a 33-month high
during the month.
Macro indicators: IIP growth decelerated to 4.4% in April
(vs.7.8% growth in March). During June, the Ministry of Statistics
released the new IIP index with base year revised from F1994 to
F2005. As per the new index, IP growth decelerated to 6.3% YoY
in April (vs. 8.8% growth in May). The CPI and WPI gap (based
on May data) turned negative again. Credit growth decelerated
during the month - 20.7% YoY growth while deposit growth
accelerated to 18.2% YoY.
In June, MSCI India outperformed all the major global indices. India was the 3rd
best performing emerging market during the month.
Year to date, India continues to rank among the bottom four (in 18th position). After falling to almost a four-month low during the month,
the market rose 9% from its low point to its high point in just nine days. The Large cap index outperformed the mid- and small-cap
indices during the month, while it underperformed these indices during the latest completed quarter.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Strategy
Retrospective June 2011 – Good Month But Bad Year,
Thus Far
June Retrospective in Summary
• India outperformed the global indices for the 1
st
time in three months.
• During the month, India was the third best performing emerging market and the 2
nd
best
performing Asian market (after Malaysia).
• Year-to-date, India retained its bottom 4 ranking (18
th
position) among emerging markets.
• The mid-cap and small-cap indices underperformed the Sensex during the month.
• Telecoms, followed by Consumer staples, were the best performing sectors while Energy
was the worst performing sector.
• FIIs and domestic institutions were buyers of equities during the month.
• Breadth rose MoM, up 23%.
• Average implied volatility fell to a 9-month low.
• At the end of June, India traded at a 56% premium to the MSCI EM.
Retrospective June 2011 – Good Month But Bad Year, Thus Far
Sector performance: Telecoms was the best performing sector
while Energy was the worst during the month. Year-to-date,
Telecoms remains the worst performing sector and Consumer
Staples, the best. For the emerging markets, Staples was the
best sector (for India, this was the 2nd
best) while Technology was
worst (for India, this was the 4th
best performing sector). Sector
rotation breadth remained moderate with five sectors changing
relative positions MoM while sector rotation depth fell further.
Institutional flows: In June, FIIs turned buyers of Indian equities.
They purchased ~$700 mn in cash and ~ $400 mn in the futures
market. Domestic institutions were marginal buyers (at ~ US$
10mn). Domestic mutual funds remained buyers for the 2nd
consecutive month (at ~ $260 mn) while domestic insurance
companies turned sellers (at ~$250 Mn). Since the start of 2011,
FIIs have bought ~ US$ 500 mn worth of stocks while domestic
institutions have bought ~ US$ 3.2bn worth of stocks.
Equity market activity: Market activity was moderate during the
month MoM. While cash volumes rose 6% MoM, cash turnover
fell further to a 28-month low. Volumes in the derivatives market
were down MoM. Inter-day and intra-day volatility fell further, but
recovered marginally by the end of the month. Even as the
implied volatility rose MoM, the average implied volatility fell to a
9-month low. The average open interest remained unchanged.
Breadth rose MoM, up 23%. The put-call ratio fell 7% MoM after
rising 23% in the previous month.
Currency: The INR appreciated vs. USD as well as Euro this
month. Over the past 12-months INR has appreciated by 4%
against the USD while it has depreciated 12% vs. the Euro YoY
Valuations: After touching a 2-month low last month, MSCI
India’s absolute and relative valuations rose MoM. India traded at
a 54% premium to EM at the end of June.
Corporate Activity: Debt issuances decelerated for another
month. Notably, M&A activity saw further acceleration during May.
Bond Market: The yield curve flattened MoM. It touched its lowest
point since Dec 2008. The 91-day yield touched a 33-month high
during the month.
Macro indicators: IIP growth decelerated to 4.4% in April
(vs.7.8% growth in March). During June, the Ministry of Statistics
released the new IIP index with base year revised from F1994 to
F2005. As per the new index, IP growth decelerated to 6.3% YoY
in April (vs. 8.8% growth in May). The CPI and WPI gap (based
on May data) turned negative again. Credit growth decelerated
during the month - 20.7% YoY growth while deposit growth
accelerated to 18.2% YoY.
In June, MSCI India outperformed all the major global indices. India was the 3rd
best performing emerging market during the month.
Year to date, India continues to rank among the bottom four (in 18th position). After falling to almost a four-month low during the month,
the market rose 9% from its low point to its high point in just nine days. The Large cap index outperformed the mid- and small-cap
indices during the month, while it underperformed these indices during the latest completed quarter.
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