The Indian equity markets have borne the brunt of the weak macro-economic environment over the last year. The BSE Sensex was the worst performing global index registering a drop of 23% in 2011. According to Securities And Exchange Board Of India (SEBI), FII's pulled out US$ 4.9 bn from the Indian markets during the year which was much higher than the outflows from other BRIC nations. This benefitted smaller south-east Asian countries particularly Indonesia as reflected in the 3% gain recorded by the Jakarta Composite index in 2011. With Indonesia's GDP expected to grow by a robust 6-7% in future and on the back of its low current account deficit, both Fitch and Moody's upgraded Indonesia to investment grade recently. In contrast, India's credit rating was downgraded to negative by Standard and Poor's.
Even as Reserve Bank of India (RBI) has embarked on a softening interest regime in FY12, India's share of problems seems to be far from over. The continued paralysis of economic reforms and sharp rupee depreciation has further compounded problems. India's fiscal deficit is being projected to swell to 5.1% of GDP in FY13, much higher than the fiscal deficit of its other BRIC counterparts. But despite the headwinds, India can still boast of a services driven economy as compared to Indonesia where commodities rule the roost. Hence, we believe that it may be quite some time before Indonesia replaces India in the BRICs.