How is Nifty faring against Asian Market indices?

Lately, there has been a lot of talk about how some FIIs have been spooked by the retrospective MAT notices and poor Q4 results from India Inc.

Short-term funds in particular have been on a selling spree that has led to a 10% correction in Nifty – after it touched a lifetime high in early Mar ‘15.

So, what are FIIs doing with the funds pulled out from India? A look at the comparative charts of six Asian indices clearly show that Nifty is not the sole sufferer.

Only Hang Seng has outperformed Nifty – and that too only during the past month.

Hang Seng vs. NIFTY (in green)

The 1 year closing chart of Hang Seng underperformed Nifty till mid-April ‘15. But after touching a 52 week high, it has also faced a correction, and may be forming a head-and-shoulders reversal pattern.

Jakarta vs. NIFTY (in green)

The Jakarta Composite index has consistently underperformed Nifty dirong the past year.

Korea KOSPI vs. NIFTY (in green)

Korea’s KOSPI index spent several months in negative territory, but managed to eke out a small gain during the past year – but has clearly underperformed against Nifty.

Malaysia KLCI vs. NIFTY (in green)

Malaysia’s KLCI index has spent the past year in negative territory, and has been the worst performer among the Asian indices.

Singapore STI vs. NIFTY (in green)

Singapore’s Straits Times index has mimicked Jakarta’s moves – making a small gain but underperforming Nifty throughout the past year.

Taiwan TSEC vs. NIFTY (in green)

Taiwan’s TSEC index tried to keep pace with Nifty, but dropped off from Aug ‘14 onwards. It managed an 8% gain during the past year, underperforming Nifty by 50%.

Small investors should take heart. The present corrective move in Nifty is an opportunity to enter good large-cap stocks. You will reap the benefits when Nifty touches 12,000 (yes, it will – in the not-too-distant future).

Comparing Nifty with Global Indices over the past year

The Indian stock market performed splendidly during the past year. Nifty gained nearly 35% when it hit its peak earlier this month. The subsequent correction pared off some of the gains. Yet Nifty clocked more than 25% gains for the year – which is quite substantial for an index dominated by large-cap stocks.

To put the gains into perspective, Nifty’s one year closing chart (in blue) has been compared with 10 global index charts (in green). With the notable exception of Argentina’s MERVAL index, which handsomely outperformed Nifty during the year, the other 9 indices trailed Nifty’s performance by large margins.

Small investors are flocking back to the Indian market – as can be seen from large inflows into domestic mutual funds – getting attracted by Nifty’s gains during the past year. It is unlikely that there will be a repeat performance from Nifty during 2015-16 fiscal year. However, a 15% gain looks possible – and will still beat bank fixed deposit and debt fund returns.

Australia All Ordinaries (in green) vs. NIFTY

Australia’s stock index dipped into negative zone during Oct ‘14 and Dec ‘14, but managed to eke out about 10% gains during the year.

Austria ATX (in green) vs. NIFTY

Austria’s ATX index gave negative returns through most of the year – managing to close flat for the year.

DAX Germany (in green) vs. NIFTY

Germany’s DAX index oscillated between positive and negative zones till the beginning of 2015. The index rallied spectacularly during the past 3 months, managing to catch up with Nifty’s gains by the end of the year.

France CAC40 (in green) vs. NIFTY

France’s CAC40 index rallied strongly from Jan ‘15 and managed to close the year with 15% gains after spending several months in negative zone.

MERVAL Argentina (in green) vs. NIFTY

Argentina’s MERVAL index took investors on a roller coaster ride – gaining a huge 100% by end Sep ‘14, then giving up most of the gains by Dec ‘14, only to rally strongly to end the year with 75% gains – handsomely outperforming Nifty.

Canada TSX (in green) vs. NIFTY

After briefly outperforming Nifty in early May ‘14, Canada’s TSX index ended the year with a meagre 5% gain.

S&P 500 (in green) vs. NIFTY

USA’s SPX index had a very good year gaining 12% in a country where interest rate is 0. But it underperformed Nifty almost throughout the year.

Taiwan TSEC (in green) vs. NIFTY

Taiwan is an Asian manufacturing tiger – specially in electronics and computers. But its TSEC index barely gave 10% returns to investors.

Korea KOSPI (in green) vs. NIFTY

Korea’s KOSPI index hugely underperformed the Nifty, just managing to close in positive zone.

Malaysia KLCI (in green) vs. NIFTY

Malaysia’s KLCI index remained in negative zone despite a late rally – underperforming Nifty by a large margin from May ‘14 onwards.

Comparative charts of world stock indices at 52 week highs

In yesterday’s post on the Nifty chart, the concluding comments were: “Expect some more correction, but remember that many global stock indices are at or near life-time or 52 week highs. That is a sign of a global bull market.”

Given below are the 1 yr closing charts of 10 global stock indices (in blue) that are at or near their 52 week highs. The 1 yr closing chart of Nifty (in green) has been superimposed for comparison purposes.

Notable exceptions are the three BRIC countries – Brazil, Russia, China – whose stock indices are well below their 52 week highs. But wait a minute. Isn’t China’s economy showing the strongest growth? Much stronger than India’s? And isn’t the economic growth in USA one of the weakest?

So, how come Nifty is performing better than the Shanghai Composite, and S&P 500 is outperforming Nifty? Just goes to show that economic growth and stock market performance don’t go hand-in-hand.

Australia All Ordinaries vs. NIFTY (in green)

The Australian index has outperformed Nifty after falling behind till Feb ‘13.

Austria ATX vs. NIFTY (in green)

 

The Austrian index has outperformed Nifty throughout the past 12 months.

France CAC40 vs. NIFTY (in green)

France’s economy is still struggling to grow, but its stock index has beaten Nifty hands down.

DAX Germany vs. NIFTY (in green)

Germany’s stock index has outperformed Nifty since Dec ‘12.

MERVAL Argentina vs. NIFTY (in green)

Argentina’s stock index is one of the best performers over the past 12 months – rising almost 150%.

Canada TSX vs. NIFTY (in green)

Canada’s stock index has matched Nifty’s performance but with a lot less volatility.

S&P 500 vs. NIFTY (in green)

The stock index of USA has trounced Nifty handsomely despite sluggish economic growth.

Taiwan TSEC vs. NIFTY (in green)

Taiwan’s TSEC has outperformed Nifty from Feb ‘13 onwards.

Korea KOSPI vs. NIFTY (in green)

KOSPI is the only index among the 10 that Nifty has managed to leave behind.

Malaysia KLCI vs. NIFTY (in green)

Malaysia’s KLCI index lagged behind Nifty till Mar ‘13, but has managed to make up the deficit.

A look at charts of Asian indices

The slowdown in economic growth in USA and Eurozone countries had a huge impact on the economies of many Asian nations – particularly those that were heavily dependent on inbound tourism and exports to North America and Europe.

Many of these Asian countries are geographically small in size and do not have a sufficiently large population that can sustain growth through domestic consumption. They suffered the most.

Even in China, which is large both in size and population, export-fuelled growth has slowed down somewhat – though growth remains quite high by global standards. The interesting thing to observe is that most stock market indices have suffered less than the respective economies.

This may partly be due to the flood of liquidity unleashed by quantitative easing programmes in USA and Europe. It may also be due to the realisation among investors that the worst is over and growth can only improve from now on.

Here is a look at the one year charts of Asian indices:

Shanghai Composite

The Shanghai Composite shows the greatest disconnect between the state of the economy and the stock market. The economy is still growing better than most in spite of some slowdown – but the index was deep in a bear market till Nov ‘12. Even after briefly returning to bull territory, it has formed a head-and-shoulders reversal pattern that can push the index down below its 200 day EMA.

Hang Seng

The Hang Seng index suffered at the hand of bears from May ‘12 to Aug ‘12, and is currently undergoing some profit booking. But it is clearly in a bull market.

Taiwan TSEC

The Taiwan TSEC index suffered a bear phase from Apr ‘12 to Nov ‘12, but has re-entered a bull market. The index has just about recovered its losses during the year.

Jakarta Composite

Despite a brief drop into bear country during May-Jun ‘12, the Jakarta Composite index has been in a long-term bull market and an outperformer among Asian indices.

Malaysia KLCI

Malaysia’s KLCI index has been in a year-long bull market, but it has been a volatile rally with occasional dips below its 200 day EMA.

Singapore STI

Singapore’s Straits Times index has been in a bull market after suffering a correction during May-Jun ‘12.

Korea KOSPI

Korea’s KOSPI index had a long struggle with the bears, but seems to have returned to a bull market for the past 3 months. It has failed to make any gains during the past 12 months.

How Asian stock indices have performed vs. BSE Sensex

In a post on Sep 15 ‘12, a comparison was posted between Asian stock indices and BSE Sensex. Except for the stock indices of Malaysia and Singapore, which had outperformed the Sensex over the previous 12 months, the Sensex did better or was an equal performer – thanks to good FII inflows.

Of late, the Sensex has been correcting after crossing the psychological 20,000 level. It could be due to the poor GDP number; or, it could be collective fear due to proximity to previous tops (which were followed by big corrections); or, it could be routine profit booking. Whatever be the reason, smart investors are probably using the dip to add.

Note that the Sensex has given positive returns over the past 6 months, as have 6 of the 7 Asian indices – with the Malaysian index being the sole exception.

China (Shanghai Composite) vs. Sensex

China’s economic growth has been higher than India’s, but that is not reflected in the Shanghai Composite index, which has underperformed the Sensex – except in the first week of Feb ‘13.

HongKong (Hang Seng) vs. Sensex

For a couple of months – from mid-Aug to Mid-Oct ‘12 – the Sensex outperformed the Hang Seng index. Thereafter, Hang Seng has been the better performer despite correcting in Feb ‘13.

Taiwan (TSEC) vs. Sensex

Sensex trailed Taiwan’s TSEC index in Aug and Sep ‘12, but has outperformed thereafter.

Indonesia (Jakarta Composite) vs. Sensex

Jakarta Composite  moved pretty much in tandem with the Sensex till Nov ‘12, but fell behind thereafter.

South Korea (KOSPI) vs. Sensex

South Korea’s KOSPI index led the Sensex till mid-Sep ‘12. Subsequently, Sensex has been the outperformer.

Malaysia (KLCI) vs. Sensex

Malaysia’s KLCI index is the only one that has given negative returns in the past 6 months. No wonder Sensex has outperformed it by a wide margin, despite falling behind in Aug ‘12.

Singapore (STI) vs. Sensex

Sensex outperformed Singapore’s STI index during the past 6 months – which is a bit of a surprise.

How is the Sensex performing against Asian indices?

You may find it hard to believe, but it is true. The Sensex has been the best performing stock index over the past 12 months when compared with its Asian peers.

Through all the chaos, scams, policy inaction, allies of the government turning foes, opposition parties stalling parliament proceedings, high interest rates, high inflation, fiscal and current account deficits, sliding exports, falling Rupee and a slipping GDP – FIIs kept faith in the Indian stock market.

DIIs on the other hand, played contrarian by selling off. Perhaps many were forced to do so as retail investors pulled money out of the market. Did anyone other than FIIs gain from the Sensex rise? May be a few fortunate or prudent investors, who locked on to FMCG and Pharma stocks.

Shown below are one year closing chart patterns of Asian stock indices (in blue), compared with Sensex chart (in green):

Shanghai Composite vs. SENSEX (in green)

Except for a brief spell in early Jan ‘12 and most of May ‘12, the Shanghai Composite index was outperformed by Sensex – particularly from Jul ‘12 onwards.

Hang Seng vs. SENSEX (in green)

Hang Seng moved in lock-step with Sensex for the first 5 months of the year, before losing some ground during the rest of the year. But it came close to matching the Sensex performance with a 20% gain for the year.

Taiwan TSEC vs. SENSEX (in green)

Taiwan’s TSEC index managed to hold its own till May ‘12 before getting left behind by the Sensex for the rest of the year.

Jakarta Composite vs. SENSEX (in green)

Except for the first half of Jan ‘12 and during Apr-May ‘12, Jakarta Composite index was no match for the Sensex.

Malaysia KLCI vs. SENSEX (in green)

For the first four months and the last four months of the year, Sensex clearly outperformed Malaysia’s KLCI index. During May-Aug ‘12, the race was a bit closer.

Singapore STI vs. SENSEX (in green)

Singapore’s Straits Times index matched or beat the Sensex performance during the first 8 months of the year, and notched up a creditable 20% gain. But Sensex outperformed STI during the last 4 months.

Korea KOSPI vs. SENSEX (in green)

For a few days in Mar ‘12 and May ‘12, Korea’s KOSPI index tried to hang on to Sensex coattails, only to be left far behind.

How Asian stock indices have performed vs. BSE Sensex

Strong inflow of FII money has taken the Sensex to a 6 months high – just below its 52 week high touched in Feb ‘12 – making the Sensex one of the better performing stock indices globally. But FIIs have been buying into other countries as well – boosting their stock indices.

Here is a look at how the one year closing chart of the Sensex (in green) compares with charts of some Asian indices (in blue).

China (Shanghai Composite) vs. Sensex

Despite its high-growth economy, China’s Shanghai Composite index has given negative returns and hugely underperformed the Sensex over the past 12 months – moving in the opposite direction since Jun ‘12.

HongKong (Hang Seng) vs. Sensex

In contrast, HongKong’s Hang Seng index has given positive returns during the past 12 months and managed to outperform the Sensex during the first 6 months of this calendar year. Only during the past 3 months has the Sensex been able to overtake the Hang Seng.

Taiwan (TSEC) vs. Sensex

Taiwan’s TSEC index has provided marginally positive returns over the past year. After matching the Sensex performance till Jun ‘12, it got left behind during the last 3 months’ rally.

Indonesia (Jakarta Composite) vs. Sensex

Despite some underperformance during Oct & Nov ‘11 and Feb ‘12, Indonesia’s Jakarta Composite index has kept pace with the Sensex and provided positive returns over the past 12 months.

South Korea (KOSPI) vs. Sensex

South Korea’s KOSPI index outperformed India’s Sensex during a 7 months period from Dec ‘11 to Jun ‘12, before the Sensex caught up during the past 3 months – both indices providing positive returns over the past year.

Malaysia (KLCI) vs. Sensex

During Sep to Nov ‘11 and Feb ‘12, Sensex performed better than Malaysia’s KLCI index. Otherwise, KLCI outperformed the Sensex and gave better returns during the past year.

Singapore (STI) vs. Sensex

Singapore’s Straits Times index outperformed India’s Sensex – except during Oct & Nov ‘11 – and gave better returns over the past one year.