At 39, Sensex has highest record closings this year
World-beating performance since August is the reason
The benchmark Sensex this week recorded its 39th record close in 2021, most among global markets, the data analysed by Business Standard shows. The US’ Dow Jones is at the second spot with 35 record closes for the year so far, followed by Germany’s DAX (31) and Taiwan’s Taiex (28).
The Sensex looked set to log its 40th record high on Tuesday but it ended with marginal loss (down 17.43 points for 0.030 per cent at 58,279.48).
With a year-to-date gain of 22 per cent, India is currently the best-performing major market globally. Concerns around the spread of the Delta variant of coronavirus have led to a pullback in many global equities since August. However, the Indian markets have managed to accelerate, thanks to a rally in blue-chip stocks amid robust domestic investor flows.
The Sensex has rallied over 9 per cent since August 3 and logged record highs on 16 occasions. This has helped India overtake the US, Germany, Taiwan, and South Korea — whose benchmark gauges are flat over a onemonth period — on the league table of most record highs for the year.
This rally has surprised many on the Street as it has come despite softness in foreign portfolio investor (FPI) flows, as well as global equities.
Experts attribute this decoupling to the influx of domestic savings into equities. “After the close of June, we have seen softness in FPI flows but domestic flows from households in India are still holding up the markets.
We have seen India outperform despite not delivering the kind of earnings growth that other emerging markets have been able to,” said Sunil Tirumalai, equity strategist, UBS Securities.
The recent surge in the domestic market has further pushed valuation into expensive territory.
The trailing 12-month price-toearnings (P/E) ratio for the Nifty is 28 times, 42 per cent higher than the long-term average, according to a note by Motilal Oswal. The trailing priceto-book (P/B) is at 3.6 times, 23 per cent above the historical average. While the market cap-to-gdp is now highest since 2007.
Tirumalai said as India has been able to control the pandemic reasonably well, investors are hoping that its economic recovery will be better than other similarly placed emerging markets.
India’s valuation premium to emerging market peers, too, is at a record of 68 per cent, compared to the average of 37 per cent, foreign brokerage Jefferies highlighted in a note this month.
Several other key markets — such as China, Hong Kong, the UK, France, Singapore, and Japan — are yet to make fresh highs this year. The UK is yet to top its pre-pandemic high. On the other hand, China, France, Singapore, and Japan have made new pandemic highs. But these markets still languish below their lifetime highs made decades ago.
The recent regulatory crackdown against technology companies in China, the biggest EM, has left investors scrambling for opportunities elsewhere.
An analysis done by Steven Holden of Copley Fund Research, who publishes on Smartkarma, showed that currently, India is the only EM in the top four where global investors have an overweight stance. China (including Hong Kong), Taiwan, South Korea, and India have the highest average weighting in the EM space, accounting for twothirds of allocations.