22 hrs ago
Global funds retreat from India stocks as valuations face pressure
Some investors around the world are losing interest in Indian stocks.
They say Indian companies have not produced strong enough earnings and do not offer as many artificial-intelligence opportunities as markets in South Korea and Taiwan.
Indian stocks are also more expensive than many other emerging-market stocks.
Foreign investors have pulled about $25 billion from Indian shares this year.
The falling rupee and high oil prices have added to their concerns.
Local Indian investors have bought stocks and helped support the market.
Some analysts still believe India’s economy and stock market can improve.
Morgan Stanley expects the Sensex to rise under its main forecast.
Foreign portfolio ownership of Indian companies has fallen to a 17-year low.
Some global money managers have reduced their India allocations to zero, citing weak earnings and limited artificial-intelligence exposure.
Foreign funds have withdrawn about $25 billion from Indian equities this year, while the Nifty 50 remains near its mid-2024 level.
Indian stocks trade at 17.6 times forward earnings and carry a 77% premium to the emerging-market benchmark.
Local institutions have bought about $60 billion in stocks this year, while Morgan Stanley expects the Sensex to rise in its base case.
- Who
- Global money managers, Indian local institutions, Morgan Stanley, and Indian companies and markets are involved.
- What
- Foreign investors are reducing or eliminating their holdings in Indian equities, contributing to weaker market performance and lower foreign ownership.
- Where
- India’s stock market, including the National Stock Exchange of India and the BSE, is affected.
- When
- The withdrawals have occurred mainly this year and over the past year or so; the Nifty 50 is on track to end a decade-long annual-gains streak.
- Why
- Investors cite limited artificial-intelligence exposure, lukewarm earnings, high valuations, high oil prices, a weak rupee, and concerns about jobs, manufacturing, and foreign direct investment.
Bearish global investors
More optimistic analysts and local buyers
India’s investment appeal
Bearish global investors
Some fund managers say India lacks a strong artificial-intelligence investment theme, has lukewarm corporate earnings, and is losing its growth appeal relative to South Korea and Taiwan.
More optimistic analysts and local buyers
Morgan Stanley says India is experiencing a multi-quarter growth upcycle and that supportive valuations could improve market performance in the coming months.
Valuations and market prospects
Bearish global investors
Skeptical investors argue Indian equities remain expensive compared with emerging-market peers, while high oil prices and a weaker rupee threaten dollar returns and corporate margins.
More optimistic analysts and local buyers
Morgan Stanley expects the Sensex to rise 19% to 89,000 by June next year in its base case, with a bull-case target of 100,000.
Sources of market support
Bearish global investors
Foreign funds have reduced exposure, and some investors say India must do more to create jobs, expand manufacturing, and attract foreign direct investment.
More optimistic analysts and local buyers
Indian institutions have bought about $60 billion in stocks this year, helping support the broader market and small-cap companies linked to the data-center build-out.
Key facts
- Foreign outflows
- Global funds have withdrawn about $25 billion net from Indian equities this year.
- Foreign ownership
- Foreign portfolio ownership of companies listed on the National Stock Exchange of India has reached a 17-year low.
- Valuation
- Indian equities trade at about 17.6 times forward earnings and the Nifty 50 carries a 77% premium to the emerging-market benchmark.
- Local buying
- Indian institutions have made about $60 billion in net stock purchases this year, according to BSE data.
- Market outlook
- Morgan Stanley forecasts the BSE Sensex could reach 89,000 by June next year in its base case and 100,000 in a bull case.
- Index weight
- India’s share of the MSCI Emerging Markets Index has fallen to about 11%, from 16% a year earlier.
- Currency pressure
- The rupee has fallen to a record low and remains among Asia’s worst-performing currencies this year, according to the article.
Quotes
Gerald Gan
Chief investment officer at a Singapore-based investment firm
“Many wealth managers have taken India back to underweight or completely out as they are more concerned about covering the increased weighting of tech plays in Taiwan and South Korea. They don’t see the same kind of risk of missing out in India given the headwind of a high oil price and weak currency.”
theprint.in
“Modi came in. He did some positive things that were done very well and within a reasonable timeframe, such as GST harmonization, the real estate reform, the bankruptcy court, but that hasn’t solved the real issue. The issue is jobs, it’s trying to build manufacturing, trying to gain the FDI.”
theprint.in
Sources
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