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Dollar returns make a smart comeback in 2018

, ET Bureau|
Updated: Jan 03, 2019, 08.45 AM IST
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In the first nine months of the year, dollar returns were largely negative given the weakness in the markets and the rupee’s slide against the greenback.

Highlights

  • Since Nov, dollar returns have staged a comeback thanks to market’s gain and the rupee’s rise
  • India and Indonesia lead emerging markets’ outperformance over developed markets
  • After weeks of underperformance, IT stocks showed some strength in the last one week

It makes sense for investors to track dollar returns of stocks and indices. Not only is it important in the global sense given that foreigners own more than 40 per cent of the Nifty, it is also an accurate reflection of the Indian stock market’s performance when benchmarked against the global and other emerging market indices.

In the first nine months of the year, dollar returns were largely negative given the weakness in the markets and the rupee’s slide against the greenback. But since November, dollar returns have staged a smart comeback thanks to market’s gain and the rupee’s rise against the dollar. The Nifty has also performed much better, though overall performance for the year is still down due to the rupee’s weakness for much of the year.

India and Indonesia lead emerging markets’ outperformance over developed markets in the past three months — the MSCI Emerging Markets index has outperformed the MSCI World index by 9 per cent. Indian markets in dollar terms are up 11 per cent during the same period, one of the only two markets to give positive return.

While in rupee terms the Nifty is up 4.8 per cent, a 6 per cent rise in the rupee against the greenback has led to its dollar return of 11 per cent. After weeks of underperformance, IT stocks showed some strength in the last one week. Infosys with a 4 per cent gain was the top gainer among the top 15 FII-heavy stocks. TCS gained 1.8 per cent. ICICI Bank, HDFC and Bajaj Finance gained 2.8 per cent, 2.5 per cent and 1.8 per cent, respectively. Maruti Suzuki with a negative return of 4 per cent was the worst performer due to the weak auto numbers for December.

Dollar snip 1

India’s performance in the last one year too has remained impressive in dollar terms in comparison with global markets. Although 2018 was a bad year for equities with all 15 most-tracked global indices giving negative returns. Indian markets with a negative 6 per cent return was the third best performer after Brazil (negative 5.2 per cent) and the US (negative 5.6 per cent), according to Bloomberg. In local currency terms, India’s markets gained 3.4 per cent, however, the rupee’s fall in the first nine months of 2018 kept the overall returns negative.

TOP PERFORMERS OF 2018
Of the top 15 FII-heavy stocks, Bajaj Finance was the best performer with a 38 per cent gain in dollar market capitalisation (52 per cent in rupee value). Since October, it has gained 35 per cent in dollar value (27 per cent). TCS, India’s largest company by market capitalisation, was the second-best performing stock in 2018 (29 per cent dollar gain and 42 per cent rupee gain); however, since October, it has lost 2.4 per cent in dollar value (and 8 per cent in rupee terms). HUL with 20.3 per cent return is the third-best performer.

TOP PERFORMERS IN THE PAST THREE MONTHS
Bajaj Finance remained top with 35 per cent dollar returns (26.9 per cent in rupee terms), followed by ICICI Bank with 26.4 per cent returns (19.1 per cent in rupee terms). HUL with 24.9 per cent return (18.8 per cent in rupee term) was the third-best performer.


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