Why India stands apart from other emerging markets

IN THE global emerging market (EM) picture, India seems to be one of the standouts, and this trend looks set to persist.

Last quarter, there was a sharp selloff in emerging markets driven by concerns surrounding slowing economic growth, falling commodity prices and the prospect of rising US interest rates. There were redemptions of US$6.5 billion from emerging market funds driven primarily by ETF (exchange-traded fund) redemptions.

This resulted in net capital outflows from India for the quarter amounting to US$2.6 billion. However, India's relative performance against all major emerging countries continues to improve dramatically. Thus, over the last 24 months, the MSCI India has appreciated 9.3 per cent in USD terms while the MSCI EM index has declined 7 per cent. We expect this relative divergence within EM to continue as the economic, social and political conditions in individual countries diverge.