Markets sustain recovery even as new share issues hit a high

23 June 2007

In arrangement with Thomas White Global Research

Investor interest in emerging markets like India is so strong that supply of new shares worth as much as $7 billion by Indian companies in just two weeks was absorbed immediately. Though the response from domestic investors to the new share offers was subdued, foreign investors more than made up by placing large bids.

Indian markets outperformed other emerging markets this week and have recouped most of the losses from earlier this month. However, select sectors have come under margin pressure and markets have not yet discounted the downside. Outsourcing companies would see margin erosion on stronger rupee while auto companies are facing a downswing in volume growth.

The MSCI India index returned 2.7 per cent for the first four days of this week in US dollars as compared to 1.73 per cent returned by the MSCI Emerging Markets index.

For the year, MSCI India index has returned 15.79 per cent in US dollars as against 18.5 per cent returned by MSCI Emerging Markets Index. The MSCI India index returned a much lower 6.52 per cent in Indian rupees as the US dollar has depreciated against the rupee this year.