“Give me some sunshine
Give me some rain
Give me another chance
I want to grow up once again”
How fast things change – exactly a year ago it was Armageddon all around the world. And markets worldwide pleaded the central banks for some respite from the relentless selling and lack of confidence. The central banks reacted the only way they knew – banning short selling (so that no one could sell), and printing money (so that atleast they had the money to buy the shares/mortgages/xyz).
Last week I was wondering about the fund flows in the emerging markets, and the final data for 2009 does confirm what I had suspected. That 2009 was indeed the year with perhaps the highest amount of capital flows into the Emerging markets. In the Indian Equity markets alone, FIIs pumped USD 18 Billion – slightly higher than the previous best of USD 17 Billion in 2007. This takes back the overall FII holdings in the overall market back to the highs of 19-20%, and hence there is very little room to grow further. Any incremental flows (which is very probable) would have to come from the promoters’ holding (via the IPO and FPO route). And this is indeed going to be the story of 2010 (if the run continues) – more than USD 10 billion worth of new issues could hit the markets. Another interesting recent change has been that the past few IPOs have got listed at a premium – a good change from mid-2009 when all the IPOs and QIPs were opening at a steep discount. Starting with Oil India, most of the recent IPOs have opened at good premium to the offer price – COX and Kings, JSW Energy and Godrej Properties.
On the markets, I continue to hold the bullish view, and think that unless budget is a real dampener, we are going all the way up (all the way bole to 6000). Yesterday, I was reading a very nice report which stated that past 2-3 years have been dominated by macro themes, and stock performance really didn’t matter. However, 2010 might be different, and we can already see vast difference in various sectors’ performance. Whereas the Autos and IT is trading at their lifetime highs, Real Estate and Telecom are closer to their lifetime lows. So, stock picking may be much more important this year than has been in the past couple of years.
INR seems to have turned around the corner, and am still expecting it to go all the way up to 42-44 zone. The flows have improved, and even though the trade balance continue to be USD -10 billion/month, the trump card could be the KG Basin and Cairn Energy’s fields. Whenever their production kicks in (some time in 2011), the Oil import bill would go down, and we may see strength in INR. So, unless the FII flows completely reverses, we may see continuously appreciating INR over the course of the year.
Food for thought: Everyone in the world believes that China and India would drive up the world growth in the coming days. And yet, Chinese markets have been quite subdued in recent times – in fact they have taken a beating couple of times on fears of bubble. So, this is slightly confusing – I would expect China to be the best performing market rather than Brazil or whosoever it was in 2009. Add to it the fact that the country would start trading Index Futures (till now there were no index futures!!!) in March 2010. Watch out for the Chinese market performance this year.
P.S.- Index Futures were introduced in India in 2000-01, and the markets almost quadrupled in the following 5-6 years. And much like India back then, China still is a locally driven market.
