Indian equities have had an awful start to 2011, with the Sensex selling off big today. Worries about inflation are rising and now one of the world’s most important emerging markets is starting to garner bearish views from analysts.Emil Wolter, RBS’ Head of Regional Asian Equities Strategy, is predicting that Indian equities will disappoint in 2011, according to CNBC TV-18. He sees an Indian equities slowdown as a result of rising growth in developed markets.
But if growth is picking up on a broader basis, both for within the region and also globally and furthermore there is some increase in bond yields, this combination of factors might see that the appetite for Indian financial paper is waning a bit.
Interestingly, since October, when bond yields in the US hit their low and over the last three months where they have been increasing, the flows into India have been stabilizing and reversing and the equity markets have underperformed quite substantially.
Wolter’s take comes as the BSE Sensex dropped 467 points on Monday and the NSE Nifty recorded a 141 point drop. The Indian equity market has had losses for five straight days.
Investors have been selling off stocks they expect to be devalued when the RBI increases key rates after its policy review on January 25. India has seen and 18% increase in inflation since this time last year.