The benchmark Sensex Index's gains have been powered by an improving economic outlook thanks to the cheaper price of oil – which accounts for 35 percent of the country's total imports – and easier monetary conditions after the Reserve Bank of India jumped on the easing bandwagon with a surprise interest rate cut mid-month.
"India's performance came in stronger than most had expected. The recent rate cut helped – we were surprised they moved so quickly," said Uwe Parpart, chief strategist at Reorient Group.
Parpart expects Indian stocks will continue to outperform this year. He is also upbeat on the outlook for Chinese and Japanese equities. The latter, however, have not kicked off the year with the same gusto as their South Asian counterparts. The benchmark Shanghai Composite and Nikkei 225 are both up 1 percent year to date.
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"Recent risk-off sentiment has led to a re-strengthening of the yen, but we won't see if for that much longer. The yen will weaken to 125 against the dollar at some point this year and that will be a powerful driver of profits for Japanese companies," he said. Parpart expects yen depreciation to be driven by a stronger dollar as the Federal Reserve gets closer to tightening its monetary screws.
Southeast Asia's shining stars
Southeast Asian markets were not far behind India, with Vietnam, Thai and Philippines stocks rising 6.9 percent, 5.9 percent and 5.4 percent, respectively, in the first month of the year.
Gains in Vietnam have been fueled by attractive valuations and improving macroeconomic fundamentals. Meanwhile, cheaper oil has helped fuel gains in the Thai and the Philippine stock markets as both countries are net-oil importers, say strategists.
Oil prices have more than halved since last summer amid an environment of feeble global demand and strong supply growth.
While the fall in oil is a blessing for most of Asia, this is not the case for net-oil exporter Malaysia. Regardless, its stock market managed to eke out a gain of 1.2 percent.
"Malaysia's will struggle because of lower oil prices, I expect it will underperform the region this year," said Parpart.