Foreign investors interested but wary of politics: Barclays

Conclusion based on interaction by Barclays with over 50 investors in Europe & United States of America

Barclays Securities noted that foreign investors show high levels of interest in Indian equities but are wary of uncertainty ahead of the upcoming union elections.

The conclusion was based on an interaction by Barclays with over 50 investors in Europe and the United States of America. An India Equity Strategy report dated 14 May noted that the interest is on account of government moves on economic reforms, favourable inflation data and correction in gold and oil.

“On the other hand, investors remain concerned about short term disappointment in GDP growth and uncertainty due to upcoming union elections in India,” said the report authored by Bhuvnesh Singh and Kunal Agarwal.

The report stated that most investors are either neutral or underweight on consumer stables because of high valuations and concerns over growth. Healthcare on the other hand is seen to be offer better valuations and hence is a consensus overweight.

“…investors are concerned that fiscal consolidation measures along with recent poor data from the Index of Industrial Production (IIP) could imply a sharp correction in GDP growth estimates. Thus, we found most investors holding on to an underweight position in Industrials and Materials,” added the report.

Investors also believe the Reserve Bank of India is likely to cut interest rates sharply in the days ahead, it said.