Global investors are warming up to India, it appears from the fact that money has started flowing into India dedicated funds.
Global investors are warming up to India, it appears from the fact that money has started flowing into India dedicated funds after the local markets gained close to 40% in a global rally.
These funds saw inflows of around Rs 500 crore in the week ended April 22 and a little over Rs 1,000 crore over the past four weeks, Citigroup analysts Elaine Chu and Markus Rosgen wrote in a report.
Inflows for the year were marginally negative by around Rs 10 crore until the latest inflows. Following the inflows, however, cumulative inflows have turned positive at around Rs 490 crore.
The same week (to April 22) last year had seen outflows of Rs 4,000 crore.
The Sensex has gained 3211 points since the beginning of the rally.
From the beginning of the year till March 9, after which the rally began, FIIs sold Indian equities worth Rs 9,000 crore.
Since March 9, they have invested Rs 8,000 crore in the Indian markets.
Experts, however, aren’t celebrating just yet. While it is true that investors have allotted money for India, when and how it comes into India would depend on the new government at the Centre, the banking system in the US and economic numbers, they say.
The fiscal position and the general elections are still a cause for concern.
However, the outlook may be improving.
“While the first worry is justified, we believe the risk of an anti-market government emerging is very low. An attractive prospective PE of 11.4x suggests India could rebound once the election is out of the way,” HSBC analysts John Lomax, Wietse Nijenhuis and Anupama Rao said in a report.
The Indian economy was likely to rebound with growth returning in the second quarter of FY10 and real GDP growth for CY09 could come in at 6.2%, the HSBC analysts said. “We expect earnings growth of 5-10% this year too, whereas the consensus has already been cut to 4%.”
Jagannadham Thunuguntla, equity head at SMC Global Securities feels India’s attractiveness as an investment destination would depend on the outcome of the elections. “There would be a bit of herd mentality as far as foreign money is concerned. Once the initial flow begins, then a lot more can follow. Right now, FIIs would be looking to a stable government for cues. If there is sufficient flexibility for the government to act, then one can expect foreign money to chase India,” he said.
Ajay Argal, co-head, equity investments at Birla Sun Life Mutual Fund agrees that most FIIs would be playing a waiting game as far as the elections are concerned. But they would also watch the health of the financial system in the US and data in India. “The first week of May will reveal how well banks are holding up to stress tests and that will have an impact on the financial sector and global sentiment. In India, FIIs would be watching for numbers like industrial production,” he said.
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