India To Outperform Global Markets Amid Gloom, Say Devina Mehra And Vikas Khemani

The Indian equity market remains a beacon of hope amid gloom in global markets, as Europe is seen as a bad bet and the U.S. may only make a comeback next quarter, according to analysts.

The domestic market has been an outperformer globally and is likely to hold out for the rest of the year too, Devina Mehra, founder and chairperson at First Global, told BQ Prime’s Niraj Shah.

According to Vikas Khemani, founder at Carnelian Capital Advisors, the nation is nearing the peak of the interest hike cycle, with inflation tapering off as the base effect comes into play.

Pessimism is the prevalent sentiment and it is rubbing off on India, but better days are expected in a year’s time, Khemani said. India’s economic fundamentals remain robust and in terms of liquidity and macroeconomic factors, the country is well-placed, he said.

"We are the only bright spot in the global economy. Whatever is happening in the world—be it Europe, the U.S., or for that matter, China—India tends to benefit, and especially on the manufacturing front, which has been India’s Achilles’ heel for many years,” Khemani said.

Investor caution and portfolio outflows seen today are along expected lines, but the anxiety will wear off in the next three to four months, he said.

According to him, the recent share price decline of Credit Suisse Group AG and Deutsche Bank AG can lead to a contagion affecting several countries, including India, and trigger volatility.

While there will be choppiness given the market rally over the last two months, it will not lead to significant downside in overall Indian equity market, Mehra said.

Amid concerns over the state of the Indian economy, Mehra said that markets are not directly linked to economic conditions.

But markets in 2022 are different from what they were in 2021, which saw recovery after the fall of March 2020. Hence, investors will have to "pick and choose", she said.

Globally, the rate hikes have impacted both fixed income as well as equities, but a lot of it has already been factored into the prices, Mehra said.

She referred to the Nasdaq, which has moved up to 35th rank among 42 global indices, from the 40th position it occupied a few months ago.

However, non-tech equities look better-placed than tech ones in the U.S., said Mehra.

The S&P has already recorded three negative quarters, which is a rare occurrence. Statistically, this prepares the ground for a positive fourth quarter, Mehra said.

According to her, Europe doesn’t look good as far as equities are concerned, with the energy crisis weighing on the continent’s economy.

Additionally, the U.K. has “made a mess” of its own, with back and forth on the fiscal and monetary front, she said.