WWRR Vol.2.017

FPI flows have also made a cycle low, and with India
ownership in the average EM portfolio down to seven-year
lows, there is a good case for a turn in FPI flows in 2019.
This is also consistent with our constructive EM call. Which
domestic flows are making new highs, we would caution
against using a cycle argument here since domestic flows
seem to be in a structural uptrend.
Exhibit 22: Flows data
35,000
12M trailing flows (US$ mn)
30,000
25,000
20,000
15,000
10,000
5,000
-
(5,000)
(10,000)
FPI flows
DMF flows
Total Flows
(15,000)
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Inter day volatility has risen sharply over the past three
months and the adjoining chart suggests that it is likely to
come down in the coming months. That said, the market has
to negotiate the usual rise in volatility associated with
elections.
Source: CDSL, SEBI, BSE, Morgan Stanley Research
Exhibit 23: Interday Volatility
100%
80%
60%
3M change in 3M Rolling Interday
Volatility
40%
20%
0%
-20%
-40%
Medium- and long-term equity returns could have put a
floor last year and may continue their ascent in 2019.
-60%
2010
2011
2012
2013
2014
Source: Bloomberg, Morgan Stanley Research
2015
2016
2017
2018
Exhibit 24: Sensex 3 year and 10 year gap
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
40%
10-year CAGR Sensex35%
performance
30%
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Bloomberg, Morgan Stanley Research
3-year CAGR Sensex
performance
25%
20%
15%
10%
5%
0%
-5%
8