August Attempt: Despite outflows, MSCI India outperformed emerging markets last month

Emerging market

As per the graph above, MSCI India improved after two months despite market underperformance. The index rose to 2 percent in August from -6 percent and - 4 percent in June and July respectively.

Despite the government’s attempt to revive investor sentiment, the market performance in August was largely lacklustre like July, Morgan Stanley noted.

Last month, the mid- and small-cap indices underperformed the Sensex by 0.9 percent and 0.8 percent, respectively, and continued to underperform on a YTD (year-to-date) basis, said the report. On the contrary, the MSCI India Growth index outperformed the MSCI India Standard and Value indices in August.

August Market Performance v/s YTD Performance

On the flow's front, the research house said that the foreign investors sold Indian stocks more than September 2018 but less than October 2018. In contrast, domestic institutions and investors were strong buyers in August- more than September 2018 but less than October 2018. In 2019 so far, FPIs (foreign portfolio investors) are net buyers of $7.1 billion and domestic mutual funds are net buyers of $5.9 million in equities, while domestic insurance companies sold stock worth US$1.3 billion.

Also, cash volumes were lower month-on-month as well as year-on-year while derivatives volumes were up both on a monthly and yearly basis. Implied volatility and VIX were up 15.7 percent and 19.8 percent MoM, respectively. Put call ratio rose to a six-month high, up 9 percent MoM, the report added.

On the currency, bond market and commodities front, the brokerage highlighted the following:

: The rupee depreciated by 3.6 percent MoM vs the US dollar and 2.7 percent vs the euro in the last month. So far this year, the rupee has depreciated 2.3 percent vs the US dollar and appreciated 1.5 percent vs the euro.

Bond: The 91-day yield declined by 23 basis points (bps) during the month and the 10-year treasury yield was up 19 bps. The yield curve steepened sharply during August.

Commodities: In August, the oil prices declined 4.2 percent MoM in USD/barrel and 7.78 percent MoM in INR/barrel. Gold prices were up 10.3 percent in rupee terms and 7.5 percent in US dollar terms.