Government and Central Bank Events in India

There were two major events in India last week which should have led to increased stock market volatility. These were related to the sudden resignation of the Governor of Reserve Bank of India, and five State Assembly elections (approximately 15% of the voting public) which took place.

However, the Indian stock market (as measured by the Nifty, an Index of India’s 50 largest stocks)continued to scale upwards from its recent low of 10,030 (October 26th) to close at 10,805 last Friday, 14th December. That’s a move of 7.7% upwards from the low, whilst the S&P has moved down 2.2% in local currency terms over the equivalent period (INR has also rallied relative to the AUD, USD and NZD in this period). Part of this recent move upwards is a bounce from extremely poor months in September and October. Indian markets are 2nd best performing in 2018 after Brazil (which has seen a cyclical bounce in 2018). Despite events, we see the fundamental continuing to be the main driver …