INDIAN EQUITIES UNDERPERFORM

Despite recent revival in the activity, the Indian equity market delivered much lower returns in the first two months of 2013 compared with its Asian emerging counterparts including China, Indonesia, Philippines, and Thailand. Even on the year-on-year basis, Indian equities fell to beat these countries. During the two months of 2013, S&P BSE Sensex -- the Indian benchmark of 30 large cap companies spanning across sectors such as automobiles, banking, capital goods, cement, IT, metals, pharmaceuticals, and telecom -- gained a meagre 1.3%.The Filipino benchmark PSEi index (PCOMP) was the biggest gainer in a sample of 15 emerging market equity benchmarks. It has increased by 17.6% in the current calendar year so far. It is followed by Argentina (16.5%), and Indonesia (12.9%). While the Indian equity market has reported a slew of foreign institutional flows, this failed to perk up the returns for investors. So far in 2013, Indian equities have attracted net foreign institutional investment worth $ 8.4 billion (approximately Rs 46,000 crore). However, the funds chased equities in only a handful of sectors, predominantly IT. For instance, the ET IT index has gained over 23% in the current year. As many as 16 out of 24 ET sector indices reported losses during the period reflecting a very narrow breadth of the investment. This has impacted the overall performance of the broader Sensex. A decelerating home economy, steep consumer inflation despite slower income growth, lacklustre corporate performance in the December 2012 quarter, weak projection of economic growth, and lack of any major budget announcements to improve capital investments weigh heavy on market sentiments.The weak trend in Indian equities may continue until the signs of reversal in the sluggish trend in economic growth and corporate investments.