Sumary of Most FPIs waiting for a correction on Dalal Street to buy more: Pratik Gupta:
- Foreign portfolio investors still like India’s long-term outlook but they are concerned that at current valuations, the market is already pricing in a lot of the near-term upside, said Pratik Gupta, CEO and Co-Head, Kotak Institutional Equities.
- Will emerging markets see a sell-off similar to the taper tantrum of 2013?The Fed’s policy shift last month had indicated that the ultra-loose monetary environment won’t last forever and it implied that we would see a tighter global liquidity environment and higher bond yields going forward.
- In any case, India may not be as badly impacted from any Fed taper as in 2013 given a much lower current account deficit, bigger foreign exchange reserves and a stronger growth outlook.
- Foreign portfolio investors still like India’s long-term outlook, but they are concerned that at current valuations, the market is already pricing in a lot of the near-term upside.
- Most FPIs are waiting for a correction to buy more, but for now, they are staying invested with most maintaining a modest overweight position on India – as it is one of the few large, liquid emerging markets which offers strong long-term growth.
- We’re also seeing strong interest from FPIs in ongoing IPOs from India, especially in technology-based companies – these can attract new pools of global capital.
- We also like the steel sector which should benefit from sharp deleveraging and earnings upgrades as demand continues to outpace supply growth.
- We suggest avoiding upstream oil companies where cost structures remain high and production growth remains weak.