Foreign portfolio flows into Indian equities this year may range $15-20 billion, almost similar or even exceeding the previous year’s level, according to Tai Hui, Managing Director and Chief Market Strategist Asia, JP Morgan Funds.
Inflow in 11 out of 13 years The momentum is expected to be sustained even as one may see selective or choosy fund flows into emerging markets such as India due to the US Federal Reserve tapering, Tai Hui told Business Line in an interview here.
India has seen net foreign institutional investment in equities in 11 of the last 13 years since 2000, he pointed out. The two years where there was net outflow was in 2008 (Lehman Brothers’ collapse) and 2011 (European sovereign debt crisis).
“Unless there is an external catastrophe, there is no reason to believe that money will not come into India,” Hui said, adding that India could get even more if it were to further improve macroeconomic indicators.
There is more resilience in the Indian markets now, thanks to the Reserve Bank of India policies over the last six to nine months, which had reinforced credibility with investors.
“If we get an improvement in the economy albeit even a gradual one and a clarification on politics, I do expect money to continue to come in,” he said.
‘Wait and see’ Hui said he was advising his clients outside India to adopt “wait and see” approach on India, not to get out but to get in.
“Valuation in India, on a price-earnings side, may not look super attractive. But on a price-to-book ratio, it is still below the 20-year long-term average. In that sense, valuation as a hurdle is not a huge issue.”
Of course, a cheap valuation alone does not provide a compelling case. Even on GDP growth, deterioration seems to have stopped for now and it has moved from deceleration to flat line movement in the pace of change.
“Why am I not recommending to my clients to jump into India right now?
“This is because we have not yet seen movement from stable to uptick.
“If I see that then I would be compelled to advise my clients to look at India more seriously.”
The macro-environment in India is starting to look positive, but is not good enough to have strong conviction buy for JP Morgan Funds, he said.
Foreign investors would also see a wait-and-watch approach given that general elections are round the corner in India, said JP Morgan’s Hui said.