Walking on air

Christmas is around the corner and India-dedicated fund managers in Singapore, Hong Kong, New York, London and Dubai are, in all probability, grinning from ear to ear looking at their performance spreadsheets. After counting and recounting the gains on their India portfolio this year, it’s understandable if the overwhelming sentiment among them about the country is: “If there was ever an investing heaven on earth, it is here, it is here.”

The truth is that despite the current increase in allocation, for many emerging market funds, India is just a speck on their overall portfolio. But it is not every year that you get a 35% annual return, that too, just on the frontline index. This special issue on outperformers delves into the jaw-dropping return of many individual stocks.  

Trees don’t grow to the skies, and it seems unlikely that the benchmark Sensex will compound another 35% in 2015. But with the yen carry trade back in vogue, strange things have been happening. The Nikkei seems unstoppable and is flirting with 18,000, a seven-year high and about 7,000 miles away from Tokyo, the Nasdaq is crawling back towards its all-time high; this after being left for dead in the 2000 tech crash. It had plummeted from an all-time high of 5,133 in March 2000 to 1,110 in October 2002 and bottomed out at 1,270 during the credit crunch of late 2008. Now, at 4,800, it is only 7% away from hitting a new all-time high. The renewed frenzy in the tech space does have a role to play and while the analogy might not be an exact fit, it points to the tremendous ‘buy on dips’ undercurrent prevalent in equity markets around the world.

If global markets with lower growth rates can rally to all-time highs, so can India, goes the optimists’ refrain. After all, we now have both macro and micro playing in our favour. Given the prevalent tailwind, it must be very hard for local investors and India-focused funds to suppress a feeling of invincibility.