In the charts: examining the performance of the Indian financial markets

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NEW DELHI: The year has so far belonged to the bulls, as the stock markets have scripted many historic feats.
With benchmarks gaining over 25 percent so far this year, the performance of Indian financial markets has been steadily rising.
Here is an overview of the evolution of the financial markets:
Promising stock market
The stock market remained vibrant for most of September, supported by continued long interest from foreign portfolio investors (REITs) and mutual funds.
Both BSE sensex and Nifty 50 hit new highs in the first four weeks of September.
However, the market ended its winning streak in the week ended October 1 as a sharp rise in crude oil prices, tightening US bond yields and the Evergrande debt crisis in China. have started to weaken investor sentiment towards emerging economies.
Despite a decline towards the end of September, the performance of sensex and Nifty in September was good, with returns between 2.7% and 2.8%.
The performance of the broad market in September was better than benchmarks which include a few large cap scripts.
The CMIE Global Stock Price Index (COSPI), which was home to 3,101 actively traded scripts on the exchanges, delivered 4% returns in September, outperforming the sensex by 126 basis points and the Nifty by 116 basis points. .

The highest 10% of stocks by market cap in the COSPI, which makes up the top decile, generated the lowest returns of 3.7% in September 2021.
Deciles 2 through deciles 7 gave returns between 4.2 and 8.3 percent, while the remaining three deciles, comprising small caps, gave double-digit returns between 10 and 20 percent.
Among sector indices, real estate shone on the stock markets, generating good returns of 30.6% in September 2021.

The CMIE Infrastructure Construction Index also generated returns of 12.3 percent during the month.
Indexes for contact-based services such as hotels and tourism and recreation services saw strong gains of around 20-30% after the restrictions on Covid-19 were eased.
Consumer goods companies, both durable and non-durable, also performed well on the stock markets in light of improving consumer sentiment and expectations during the holiday season that followed.
Driven by rising crude oil prices, the CMIE Crude Oil and Natural Gas Index and the CMIE Refinery Index posted smart gains of 24.3% and 11.2%, respectively, in September 2021.
The current valuation of COSPI is very high at 41.9 times its earnings multiple.
In comparison, sensex and Nifty trade at a lower price / earnings multiple. Still, these are quite high at 27 times and 30.8 times, respectively.
REITs rush
High stock valuations and the hawkish tilt of global central bankers did not deter REITs from pumping more money into the capital market in September 2021. Their net investment in domestic stocks and debt securities exceeded 3 , $ 8 billion, the highest since December 2020.
REITs recovered shares worth $ 1.8 billion in September 2021. Their main focus was in telecommunications, media, oil and gas, and building material certificates. REIT’s aversion to banking and auto stocks continued for the third consecutive month.

The REIT’s investment in debt peaked in 30 months of $ 1,742 billion in September 2021. Much of that investment was invested in sovereign bonds. In addition, they made $ 75 million through Debt-VRR and $ 168 million through hybrid securities.
Mutual funds invested $ 2.4 billion in the capital market in September 2021. Of this amount, $ 1.5 billion was spent on purchasing debt instruments and $ 912 million on debt instruments. actions.
The strength of the dollar weighs on the rupee
The rupee averaged Rs 73.54 per US dollar in September 2021 compared to Rs 74.18 per US dollar in August 2021.
Although the average monthly value of the rupee has appreciated 0.86% against the US dollar, its intra-monthly movement shows a constant depreciation in its value against the greenback until September.
During the first six days of September, the rupee strengthened against the greenback as the latter depreciated against most currencies.

The US dollar index (DXY) fell from 92.63 on August 31, 2021 to 92.04 on September 6, 2021. The greenback subsequently strengthened.
The DXY rose steadily from 92.04 on September 6, 2021 to 94.23 on September 30, 2021. The rupee weakened against the US dollar during the same period, from 73.06 to 74, 26.
The rupee appreciated against European currencies until September. It averaged Rs 101.15 per pound, compared to Rs 102.40 per pound in August 2021.
Likewise, it appreciated against the euro to Rs 86.64 per euro in September against Rs 87.35 per euro in August.
The oil heats up
Oil prices resumed their northward course in September after a brief hiatus in August.
The price of the Indian basket of crude oil averaged $ 73 per barrel during the month, up from $ 70.1 per barrel in August 2021. This was the second highest monthly level at which oil traded over the past three years.
Prices rose during the month from $ 70.7 per barrel to $ 76.7 per barrel despite Opec increasing production to the highest level since April 2020.

OPEC pumped 27.31 million barrels per day (bpd) of oil in September, 420,000 bpd more than in August. On the other hand, the demand for oil increased in September 2021 worldwide due to power shortages.
Crude oil prices are expected to stay high for some time as Opec, Russia and their allies, known as Opec +, have decided to stick to their plan for a moderate increase in production. of oil of 400,000 b / d until November 2021. In addition, the recent sharp rise in natural gas prices could also affect the oil market.
Gold prices averaged $ 1,777 per troy ounce in September 2021, compared to Rs 1,784 per troy ounce in August 2021. This is the fourth consecutive month that gold prices have fallen. .
The weakness in gold prices can be attributed to the strengthening of the US dollar which makes the yellow metal expensive in other currencies, thus affecting its demand.

Yields firm up
G-sec yields softened through most of September, but the trend reversed in the last eight days of the month as bond prices fell amid fears of a hike in the month. inflation as crude oil prices soared in the international market.
The weighted average yield on G-sec with a 10-year remaining maturity fell from 6.22% on the last day of August to 6.12% on September 22, rising to 6.21% on September 30. forward yields mimicked the trend.
The weighted average yield on G-sec with 1 year remaining to maturity fell from 3.84% to 3.61% and rose to 4.03% on a similar comparison, while the weighted average yield on G-sec with 5-year remaining maturity fell from 5.65 percent to 5.58 percent and rose to 5.66 percent.

The weighted average call rate (WACR) increased to 3.37 percent as of September 30, 2021, from 3.18 percent at the end of August 2021. This is the first time during the fiscal year in course that the WACR exceeds the reverse repo rate by 3.35 percent. hundred. It remained well below the reverse repo rate as excess liquidity was available in the market.
The RBI, in its August 2021 Monetary Policy Review, decided to be aggressive in conducting bimonthly floating rate reverse repurchase agreements (VRRRs) to absorb excess liquidity, which appears to have contributed to the increase in call rates in September.
The RBI is conducting its fourth monetary policy review for 2021-2022 from October 6 to 8, 2021. Most economists expect the Monetary Policy Committee (MPC) to hold on to rates and maintain an “accommodative” stance despite a surge in crude oil prices.
(The author is an economist at the Center for Monitoring Indian Economy.)


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