As emerging-market stocks reel under the pressure of a rising dollar and fiery trade rhetoric, Indian equities are charting a different course.
The nation’s benchmark S&P BSE Sensex Index rose 7.5 percent in the second quarter in local-currency terms, the best performance among developing nations. That’s as the MSCI Emerging Markets Index tumbled almost 9 percent.
The world’s fastest-growing major economy is relatively insulated from trade risks due to its massive domestic market and burgeoning middle class. And while India hasn’t been immune to outflows, buying by local funds has more than made up for this and helped the Sensex to so far shrug off headwinds such as rising oil prices and a weak rupee.
“The EM pack has suffered due to outflows and a strong dollar,” said Sunil Sharma, who oversees $1 billion of assets as chief investment officer at Sanctum Wealth Management Pvt. in Mumbai. “India has been resilient because of its strong economy and local flows, even as the trade war rhetoric rises.”
Domestic funds have bought a net $4.5 billion of Indian shares since the end of March, compared with $2.9 billion of foreign outflows, data compiled by Bloomberg show. Much of the local buying came in April and May, when a net 245 billion rupees ($3.6 billion) was pumped into equity funds amid poor returns from gold and real estate.
Data released in late May showing the economy grew 7.7 percent from a year earlier in the first quarter has also added to the allure of stocks.