A simple analysis of the performance of stocks and the contribution to the market movement over the past 14 months (ever since the government started its reforms program) shows that the bulk of the markets performance has been driven by stocks that have very little to do with India. In fact, the sharp Rupee depreciation (9.8% over this period) is one of the prime drivers of the performance of companies with overseas or US Dollar revenues and earnings; these stocks have largely contributed to the strong market performance.
The accompanying table shows the performance of BSE-30 stocks from August 31, 2012 (when talk of domestic reforms first surfaced), CYTD and FYTD basis. After a brief period of outperformance in the immediate months after the announcement of reforms, many reform stocks (in banking, energy, infrastructure, utilities) delivered flat-to-negative returns. Banking stocks performed strongly of late on partial unwinding of the extraordinary liquidity-tightening measures undertaken by the RBI in July-August 2013.
Excerpted from the October 31, India Daily report of Kotak