India is one of the best performing markets among world markets. In 2014, the returns amounted to 31% of investment in dollar terms and were the second best after China. The Sensex increased by 60% and reached 30,000 which were 17,903 in 2013.High performance of Indian markets made many investors to invest more and take more profits from it. The earnings growth was steady as there were no immediate economic triggers.
But this condition was soon curtailed in 2015 as Indian markets faced a secular bull run. The experts hold the view that the main benchmark indices such as Sensex and Nifty were so high in the first quarter of this year but when the third quarter corporate results were being analyzed it was so horrible and bad and analysts had to rework on the projections and downgrade its forecasts made on Indian markets. The Nifty had fallen more than 10% since mid-April to the year’s lowest level. This made Indian markets as one of the worst performing equity markets in the world from which was best in 2014.
The main reasons for the fall in Indian markets are the tax department of India detained its Minimum Alternate Tax ( MAT) since March which made foreign investment horrible Also there was no much change in the economic growth rate in 2015.The corporate earnings were subdued by the weaker demand and low capital exchange. The monsoon forecast was the below the normal level. These all added to the uneven recovery of earnings by investors and they lost their hope in Indian markets.
Foreign Institutional Investment (FIIs) a major source of India’s foreign investment had a bullish trend in the middle of April .They have sold out about Rs 9,500 crore investments this year and it may increase in the coming weeks. FIIs have been annual net sellers only twice in the past 25 years. In 2013 June-August, FIIs sold about Rs 20,000 crore worth of shares but the appointment of Raghuram Rajan as RBI governor and elevation of BJP campaign by Modi bought new investors to India. FIIs ended up in investing more than Rs 1,10,000 crore shares for that year which is one of the highest on record of India.
The reports say that other Asian markets have performed strongly this year when compared to last year and a lot of FII money has been diverted to these markets. Japan has secured $22.8 billion, Taiwan $8 billion, Brazil, $5.7 billion and South Korea $4.5 billion but India was able to secure $4.5 billion only. This made other markets to enjoy more benefits at India’s expense. High valuation and low earnings growth rate made FIIs to exit Indian market and invest in other countries.