India: The party's over?

Not so long ago, we wrote about the healthy state of the Indian economy and the meteoric rise of its main stock market indices. With 9.1% growth in 2021, 6.7% in 2022, more than 7% in 2023, and 6 to 8% expected this year, India was at the head of the class on the Asian continent.

Boosted by recent political stability and a strengthened economic structure (infrastructure, industry, corporate profits, demography, technology adoption), the sub-continent saw its stock market soar to new heights, overtaking, for example, the market capitalization of Hong Kong.

Between 2013 and 2023, the average annual return of the NSE Nifty50 , the index that groups the country's 50 largest capitalizations, hovered around 15%, while the BSE Sensex30 gained almost 185% between March 2020 and March 2024. In the process, they both outperformed the robust S&P500.

Since then, Divali (the festival celebrating the victory of light over darkness... in the stock market) has come to an end. While the S&P 500 benefited greatly from the frenzy surrounding the promise of artificial intelligence, India's performance in this area was pale, confined to the role of supplier for Uncle Sam's technology giants.

Since January 1, the national bank( SBI) and a number of companies in the energy (Bharat Petroleum, Reliance, Power Grid Corp), automotive (Tata, Mahindra, Maruti Suzuki) and industrial (Tata Steel) sectors have performed well.

But these feats failed to offset the decline of other heavyweights in the flagship index, such as banking and finance (Kotak Mahindra, Bajaj Finance, HDFC Bank), technology (HCL, Infosys), FMCG (Hindustan Unilever, ITC, Titan Limited) and construction (Larsen & Toubro), which each weigh between 2% and 9% of the Nifty.

Brazil: a gloomy start to the year

A similar picture emerges for the South American giant. With 5% growth in 2021, close to 3% in 2022 and 3.1% in 2023, Brazil has recovered well from the pandemic.

Since Lula's election at the end of 2022, Sao Paulo's stock markets have boasted relative prosperity. After a brief dip at the start of 2023, the IBOVESPA, the Brazil Broad Based Index and the IBRX50 , all moving in tandem, have gained over 30% since March 2023.

Here too, Carnival is over. Growth slowed at the start of the year (and is expected to come in at between 1.6% and 2% in the first half), hampered by the orthodoxy of the Central Bank, which kept its key rates at almost 14% for a year, before lowering them to 10.75% in April. Inflation, although down sharply, is still hovering around 4.5% year-on-year (after 8% in 2021, 9% in 2022 and 5% in 2023).

Since January, the main contributors to stock market performance have been, unsurprisingly, oil groups (including Petrobras, which accounts for 10% of the IBOVESPA index, and Vibra Energia) and a handful of manufacturers (such as Embraer, which is benefiting strongly from the upturn in global defense spending, and WEG).

But the stocks that are dragging the index down are many in number, and include behemoths such as Vale (the miner accounts for 13% of the index), banks Banco Bradesco, Itausa and Itau Unibanco, and brewer Ambev.