Indian markets outperform the world as U.S. $ index rises

Mumbai: Indian market have surpassed the world market due to the swift rise in the U.S dollar index. The Sensex of the Bombay Stock Exchange (BSE) and the Nifty of the National Stock Exchange (NSE) have gained 14 percent and 12 percent, respectively. The USDX rose by a quick 7.83 percent in over a month. It touched a high of 77.50 on August 26, reported Business Standard.

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Samir Arora, fund manager at Helios Capital, said: "It is true that currently investor interest is moving towards commodity-consuming countries rather than those which export them. Also, there is unwinding of position in commodities as the U.S. dollar is rising."

However, the benchmarks in Brazil and Russia, which are predominantly commodity exporters, have declined in the range of 10 to 21 percent during the same period. Only the equity benchmark of the FTSE 100 has gained by four percent, while the benchmarks in Hong Kong and Japan declined marginally. On the other hand, the benchmark index in China has fallen 15 percent as metal and refining stocks have high weight in the index.

Market analysts say that hedge funds buy in commodity and related stocks around the world when the dollar falls and reverse it when the dollar advances to hedge the currency risk exposure without any exposure to a single currency pair.

Meanwhile, Deepak Sawhney, head of research at Networth Stock Broking, says that a huge buying of dollar worldwide is one of the main reasons why commodity prices are falling. "Currently, funds are betting big on a dollar rise and taking positions in equity which is benefited by it. This is the chief reason why the Indian markets are holding firm even while the other markets are falling as India is not a commodity-exporting country," he said.

The USDX, which is exclusively traded on the Intercontinental Exchange platform, is a measure of the value of the U.S. dollar relative to a basket of foreign currencies, including the Euro, Japanese yen, pound sterling, Canadian dollar, Swedish kroner and Swiss frank. The index is a weighted geometric mean of the dollar�s value compared to the six currencies. The USDX touched a low of 71.33 on April 22, 2008, and traded in a narrow range for three months before it started making a quick move upwards since July 15.