Growth or evaluation? JP Morgan’s Rajiv Batra explains why FIIs are rebuilding India’s stock market

Foreign institutional investors (FIIs) are aggressively selling Indian equity in the last quarter, which has caused concerns about market stability and future growth prospects.

In the last few years, India has been one of the most attractive investment places for foreign institutional investors (FIIs). However, in the last quarter, the spirit has seen a sharp upheaval, in which FIIS aggressively flods to Indian equities.

Despite India’s strong macroeconomic status and improvement in valuation, global investors seem to be re -changing funds somewhere else.

In a special interview with the equity strategy at Eatno, Rajiv Batra, India, ASEAN, APAC (former Japan/China) JP Morgan, the reason behind the sale has shed light. It publishes that the primary driver of FII investment in India always increases not only valuation or market positioning.

Anxiety of growth drives away from the phase

HIST, FIIs have invested mainly in India for its growth potential, instead of just evaluation or market conditions. “Investors come to India, do not pay attention to evaluation, do not look at positioning, they only invest on a variable and it is growth,” says Batra, says Batra.

For the reputation of four years later, India’s combined annual income growth was 20-25%impressive. However, in the past year, especially in the last three quarters, earnings growth has dropped to 6%.

Despite the still evaluation of the PE after the correction of 19, global investors are questioning whether India still proposes the best risk-pure.

“In that scenario, FII is questioning 19 PEs, which is post-dickline, 6% earning growth-erage, it is good enough or we should pay attention to other markets that are trading at 10 PEs but still 10 -11% gives earnings growth? “He explains.

FII has reconsidered the Indian equity contact with this change in the pace of earnings.

Global Liquidity Squeeze and Market Cell-
The intensity of selling FIIs increased in early November, which the U.S. Changes in political leadership is consistent. Since then, the billion has seen $ 40 billion flow in emerging markets, a comparative scale of what was seen during the Kovid -19 crash.

Bata noted, “All of this began with an incident that took place in the beginning of November, which we saw in the US leadership, and posted that we have seen billion 40 billion flow in the emerging market equity.”

It further explains that during the market stress period, investors usually sell what they have. “For the last four years, darling markets have been India, Brazil, Mexico, Taiwan, Indonesia. Now, when sales are going on, these are the markets that the victim is. “

With the dominance of liquidity in global markets, investors once fluid the situation in these favorable regions. It is necessary to sell the current that it is not a reflection of India’s economic weakness, but affects all emerging markets.

“When there is misery, people will try to choose and choose the negative than the cause of the cause.”

When will FIIs come back?
Despite the current execution, long -term investors have begun to take note. Batra has highlighted that “sticky investors” such as pension funds and insurance companies show new interest in Indian equity.

“We have long started coming from investors to India, and most of them are from the side of sticky investors such as the pensions and insurance of the world.”

At the field and stock level, many opportunities are emerging that may not be reflected in the broad market index. However, for a full -scale FII comeback, a few key triggers need to be realized:

Simplifying the limits of liquidity – India is currently facing double liquidity squeeze, in which D Dollar will tighten the financial position (pending from March), in which D Dollar Ler Outflow and domestic tax payments. “If the issues of the fluid are solved first, it removes a small amount of headwind.”

Improve high-frequency growth indicators – Investors will closely monitor GST storage, cement consumption and other economic data to consider the strength of India’s reCOVARY. “If GST numbers are improving, cement consumption or costs are also improving … trust will come back.”

Clear indications of policy -based growth -The recent union budget and monetary policy decisions are clear to the elderly steps. “Looking at the budget and looking at the monetary policy, moving towards growth. Concerns about inflation have come down, and now there is an attempt from both. “

When growth does not rise overnight, Batra suggests that FIIs can only be a few weeks or a month away from re -entry into Indian equity.

(Disclaimer: The views given by recommendations, suggestions, opinions and experts are their own. This does not represent the views of the economic time)