Indian stocks to get improved fund flows: Morgan Stanley

India’s foreign fund inflows will be “better” this year, following the worst month since October 2008, Morgan Stanley has said.

“We do expect better fund flows through the remainder of the year,” Jonathan Garner, Morgan Stanley’s chief Asian and emerging-market strategist, said at a press conference today. “We would be surprised if this one month of outflows in May continues given the strong fundamentals in the EM world.”

Overseas investors sold a net Rs 9,440 crore ($2 billion) of Indian stocks in May, the worst month since October 2008, following the collapse of Lehman Brothers. Investors last month withdrew funds from riskier assets on concerns that European nations will have difficulty taming their budget deficits without harming the global economic recovery.

Inflows from overseas reached a record Rs 83,420 crore in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds.

They sold a record Rs 52,990 crore of shares in 2008, triggering a record annual decline, according to the data available on the website of the nation’s market regulator.

Morgan Stanley named five Indian companies with the best business models in their industry among a basket of 26 emerging market stocks. They include Reliance Industries, the nation’s most valuable company, Hindustan Unilever, the biggest household products maker, Larsen & Toubro, the largest engineering company, Tata Consultancy Services, a software services exporter, and drug maker Sun Pharmaceutical Industries.