7 Jan 2015

Standout year for Indian equities


This has been a standout year for Indian equities, as the CNX Nifty made 31.4% in local currency terms, closing at 8283 after gaining a little short of two thousand points. The Nifty price to earnings ratio stands just above its long-term average of 15 while the price to book ratio is at 2.4 compared to a long-term average of just less than 3. The first half-year saw a climb of 20.7% in the index as a surge of foreign portfolio investment anticipated a change of government in the May general election; most of the six-month gain came before the results were known. The second half was spent observing the unfolding of the new NDA government’s policy programme while the index added another 8.7%. The major feature of market liquidity was the sustained flow of foreign portfolio investment, $27bn+ in aggregate, of which $11.5bn+ came into the equity markets. The balance flowed into the steadily liberalizing government debt markets in anticipation of eventual monetary easing.

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