JOIN USCOVID-19: Indian shares underperform global peers by notches
Indian equity investors have been one of the worst-hit across the globe, as Indian markets have tumbled more than any other market in the world, save French equities. Unlike other world economies, India has experienced COVID-19 on the back of the lingering economy and fundamental woes in the financial system.
A DH analysis of major stock markets across the world shows that Indian Indices have underperformed Morgan Stanley Capital International (MSCI) World by 2.8 times, MSCI Emerging Markets by 1.5 times, and MSCI Asia Pacific by 2.6 times.
Since March 1, when the Coronavirus pandemic started ravaging the countries outside the Chinese and Asian borders, India's Nifty 50 has collapsed by 18.43%. During the same period, MSCI Emerging Markets collapsed 12.57%, MSCI World by 6.6% and MSCI Asia-Pacific by 7.08%.
The only major global index which has collapsed more than India's is French CAC40, which has plummeted by 19.53% at the same time, as US's Dow 30 went down by 7%, and British FTSE 100 by 12.75%.
On the other hand, Chinese Shanghai Composite International, the country where the pandemic originated, has corrected by paltry 0.23%. In general, major Asian Indices -- which include Hang Seng of Hong Kong and Nikkei 225 of Japan -- have performed better than western counterparts.
Experts say that it is because India witnessed the COVID-19 on the back of prolonged slowdown and systemic risk posed to its financial system due to the collapse of YES Bank that led to a larger loss for Indian shareholders. In the first week of March, the then fourth-largest private sector lender YES Bank collapsed after a prolonged quest for the capital.
"The Indian economy and markets were weaker going into the COVID crisis. The Indian markets had other problems like the Yes Bank Crisis, the NBFC crisis and slowing growth before we hit the COVID-19 Wall. The Indian economy was facing headwinds even prior to the COVID bloodbath. On the contrary, global markets were actually on much stronger fundamental footing before they got hit by the COVID crisis. These markets were impacted at the time where the macros were in the position of strength vis a vis India's position of weakening macros. India's underperformance has therefore been a combination of deteriorating fundamentals and the impact of COVID Crisis.," says Jimeet Modi of Samco Securities.
The fallout of the YES Bank collapse took an obvious toll on Indian Indices, as 42% of the weights on Nifty50 are allocated to the financial sector.
Experts say that as the government delayed the stimulus-response to the lockdown, Dalal Street took it as instability in the policy framework.