Will the Indian equity market reverse the underperformance of October 2021?
Both on year till date and in the last one year Indian equity market represented by Nifty 50 has outperformed all major global equity markets
After outperforming most of the global equity indices year to date, the Indian equity market underperformed major equity markets in the month of October. Both on year till date and in the last one year Indian equity market represented by Nifty 50 has outperformed all major global equity markets. In the last year, Nifty has generated a return of 51.4 per cent, which remains the highest.
The following table shows the performance of major global equity markets in the last one year.
|
Stats
|
S&P 500
|
DAX
|
FTSE
|
Nikkei 225
|
Nifty
|
CAC 40
|
DJIA
|
Hang Seng
|
NASDAQ
|
Bovespa
|
|
YTD
|
22.61%
|
14.36%
|
12.03%
|
5.28%
|
26.39%
|
23.04%
|
17.03%
|
-6.81%
|
20.25%
|
-13.25%
|
|
1Y
|
39.13%
|
35.27%
|
29.66%
|
23.83%
|
51.42%
|
49.47%
|
34.36%
|
3.22%
|
38.56%
|
7.16%
|
|
Max Drawdown
|
-7.48%
|
-12.04%
|
-7.30%
|
-11.34%
|
-6.90%
|
-8.23%
|
-8.10%
|
-22.90%
|
-10.54%
|
-20.86%
|
Nevertheless, in the month of October, the Indian equity market remained quite volatile. In the first 12 days of trading, Nifty 50 gained as much as 6 per cent. From the 17500 mark, it scaled the highs of 18600 in a matter of just 12 trading sessions. Nevertheless, after October 19, the market started to fall and in a few trading sessions, all the gain made in the first half of October was lost. Nifty was again trading at the 17600 mark. However, such a fall was not due to any global cues, it was purely due to over-stretched valuation that might have played down.
Among major global markets, it was only the Japanese and Brazilian equity markets that performed worse than the Indian equity market. The best performing market was tech-heavy Nasdaq, which gained 7.27 per cent in the month of October followed by the S&P 500 and Dow Jones Industrial Index. So, it was the US equity market that remained the best-performing equity market in the month of October 2021.
The following table shows the performance of major global equity market in the month of October 2021.
|
Stat
|
S&P 500
|
DAX
|
FTSE
|
Nikkei 225
|
Nifty
|
CAC 40
|
DJIA
|
Hang Seng
|
NASDAQ
|
Bovespa
|
|
Total Return
|
6.91%
|
2.81%
|
2.13%
|
-1.90%
|
0.30%
|
4.76%
|
5.84%
|
3.26%
|
7.27%
|
-6.74%
|
|
Max Drawdown
|
-1.12%
|
-1.46%
|
-1.15%
|
-3.22%
|
-4.36%
|
-1.26%
|
-1.09%
|
-2.90%
|
-1.28%
|
-9.72%
|
Maximum drawdown, which is defined as the peak-to-trough decline of an investment during a specific period, shows that in the month of October, the Indian equity market saw a max decline of 4.36 per cent. Indian equity market was second only to Brazilian market that dropped almost 10 per cent in the month of October 2021.
Looking at the performance of the Indian equity market for the month of October and last one year, we believe that we may not reverse the underperformance of October, however, on YTD basis Indian equity market will remain an outperformer.