Top equity strategist Christopher (Chris) Wood has doubled down on his long-standing belief that India is the best long-term equity market globally, adding that the ongoing bull run in India is ‘nowhere near ending’.
At an interaction hosted by CNBC TV18, Chris Wood, Global Head of Equity Strategy at Jefferies, said India's robust domestic demand and evolving equity culture, both position it strongly among major markets in Asia.
"I've taken this view since the start of the century that India is the best long-term equity market in the world. Clearly, the US has done fantastically well; but in the emerging markets -- Asian context -- India remains the great domestic demand story,” said Wood.
India's Rising Equity Culture
Wood noted a growing equity culture in India, similar to the surge in equity participation in the United States in 1980-2000s. He praised the growing retail interest in stocks and robust domestic flows as the force behind Indian markets' record-setting rise.
"You (India) have this emerging equity culture, and the dynamism of the local asset management industry and growing retail participation,” said Wood, adding, “Fundamentally it is extremely healthy that the Indian market is driven by domestic flows and not what the foreigners are doing."
Benchmark Indian equity index NSE Nifty 50 has gained more than 13 percent so far this year, with PSUs, state-run lenders, defence, railway, capital goods stocks leading the rally. The BSE PSU index has surged 44 percent this year, while the PSU Bank index is up about 30 percent since January.
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Market experts attribute the gains to a relentless flow of domestic funds from continued SIPs by retail investors. Systematic Investment Plans (SIPs) saw inflows reach Rs 21,260 crore in June this year, up 1.7 percent from the Rs 20,904 crore recorded in May.
Post-Poll Resilience
The resilience of the Indian market following recent election results has been particularly noteworthy. Indices had fallen as much as 6 percent on June 4 - the counting day - as election results showed BJP falling short of the majority mark on its own. However, since then, the Nifty has again jumped about 13 percent, making a series of fresh highs.
"Everybody in the market is staggered by the resilience of the market following the surprise election results. I’m staggered that the market only corrected one day. I think the domestic fund managers and stockbrokers - a lot of them sold stocks - on that day and the retail bought it off them. So it’s a very unusual set of circumstances,” said Wood.
The market surge has brought in some discomfort regarding over-valuation but Wood said the rally is driven by strong earnings. Yet, he cautioned that the primary risk to watch is an earnings growth disappointment."One of the risks for the market is earnings growth disappointment," he said.
India is in a unique position, where smallcap and midcap stocks are outperforming large cap shares, which offers diverse opportunities for investors. "India is the only market where smallcaps and midcaps are outperforming large caps," said Wood.
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