Feb 14 2019

Disparity between Nifty and Global Equity Indices – How long will the divergence continue?

Rebased chart (Nifty vs Global Equity Indices) – Comparing Nifty’s trajectory with global equity indices from 1st Jan 2019 to till date – a stark divergence between Nifty’s performance and that of other global equity indices is seen.A first glance at the chart below is good enough to highlight Nifty’s gross underperformance compared to the major global equity indices. The US equities {Dow Jones (purple line) and NASDAQ (yellow line)} have returned the best – gaining around 10%; Asian indices {Hang Seng (green line), Shanghai Composite (blue line) and ASX200 (red line)} have gained 7% – 9% while their European counterparts {DAX (grey line) and FTSE100 (pink line)} have also posted handsome gains, returning 6.5% – 7.5%. In this hunky dory equity growth scenario, our benchmark equity index, Nifty (orange line) has lost 1.5%.

Perplexing, isn’t it??

The US Fed  turning dovish on its future interest rate hike course has dragged the treasury yields lower. The change in Fed’s stance probably shifted the investors’ mood toward global and domestic (US) equities. On the other hand in our domestic economy, mediocre corporate earnings, lingering fears of domestic and global growth slowdown, uncertainty about election outcome, etc. are driving investors’ mood away from equities.

Will this performance disparity between Nifty and global equity indices continue? Are we betting on Nifty to recover or global equity indices to decline? Billion dollar question!!