The first half of the year 2022 saw a massive sell-off by Foreign investors. Instances when American PE firm KKR sold its entire 27% holding in Max Healthcare for ₹9,185 crores and Uber sold its entire 7.78% stake in Zomato for ₹3,088 crores showcased the loss of their interest in Indian markets.
However, after months, the foreigners are returning to the Indian stock markets. According to stock exchange data, foreigners have invested $6.4 billion in Indian equities since the start of July, after dumping over $27 billion worth over the previous six months.
The investors expect the Indian companies to deliver strong earnings. In addition to that, the fall in crude oil prices has helped to narrow down the country’s current account deficit. Also, the inflation rate in India is just a little over the Central Banks’ expectation as compared to the rest of the world.
Further, analysts expect the return of foreign money into Indian equity and bond markets to help the rupee find some reprieve, after slumping over 6.7% against the dollar this year.
Here are what analysts are saying:
“Foreigners clearly underestimated how India would tackle the pandemic and the economic recovery post-pandemic has been robust in an uncertain global environment,” said Neha Pathak, Investment specialist for India Equities at BNP Paribas NSE 0.33 % Asset Management.
“Earnings growth is going to be much better compared to other emerging markets. So, the deep cuts from FII (foreign institutional investors) ownership will reverse from here,” said Aishvarya Dadheech, fund manager at Ambit Asset Management.
According to a BofA Global Research report, emerging market funds’ allocation to India increased to 19.7% in July from 18.1% in June, while the allocation to China dropped to 36.2% from 39.4%.
With China and the rest of the world looking at growth challenges, India stands out having better earnings and GDP expectations, said Amit Sachdeva, research analyst at HSBC.
Morgan Stanley expects Asian economies such as India and Indonesia, which are focused on domestic demand, to be more resilient than those dependent on exports, as slowing demand from developed countries affects shipments.
Written by – Anoushka Roy
