February 21st, 2012
Econintersect: Not many people have been noticing but the Mumbai (Bombay) BSE Sensex has exploded to the upside in 2012, advancing more than 19% since the New Year began and over 21% from the market low on 20 December 2011. The advance has been led by Tata Motors (NYSE:TTM) gain of more than 60% so far in 2012 and more than 80% since late November.
Bloomberg reports that the luxury car market is what is boosting sales and profits for the company that is most famous for the tiny low cost sub sub-compact, the Nano. Jaguar and Land Rover have been racking up big gains in China, Russia and emerging markets in general.
From Bloomberg (15 February):
Tata Motors is turning to the British luxury brands it purchased from Ford Motor Co. in 2008 for growth and to drive international ambitions. The Jaguar Land Rover unit, based in Gaydon, England, generated 57 percent of Tata Motors’ revenue for the year ended March 31, up from 53 percent a year earlier.
As strongly as the market as rallied recently the Sensex has a way to go (about 7%) to recover from the 23% decline last year.
Click on graphic for larger image.
As reported in GEI News the same time the market was declining 23% last year, the rupee was collapsing vs. the dollar by 22%. What a double whammy! This was reflected by in the size of the declines of the India ETFs (all in dollars) - NYSE:PIN declining by 34%, NYSE:INP down 37%, NYSE:EPI down 39% and NYSE:IFN down 44%.
The exchange rate “leverage” works the in the other direction as well. Since the December low NYSE:IFN is up 27%, NYSE:PIN is up 31%, NYSE:INP is up 35% and NYSE:EPI is up 39%, with a rupee appreciation against the dollar of 8.5% boosting (in dollar terms) the Indian market rise (Sensex up 21%).
This is a good example of how currency exchange rates can have significant effects on cross border investment returns.
- Tata Motors at Record as JLR Propels Profit (Siddharth Philip, Bloomberg, 15 February 2012)
- India: Rupee Continues to Strengthen (GEI News, 02 February 2012)
- India: Inflation Lower, Rupee Higher (GEI News, 01 January 2012)
Hat tip to Sanjeev Kulkarni.