Enter the dragon: Foreign investors turn positive as China shrugs off Covid

Some funds could reallocate from other EMs to China, posing fresh headwinds for India, which commands a steep valuation premium compared with other EMs

China’s market is trying to bounce back following this year’s rout triggered by rising Covid-19 cases. Many foreign brokerages have turned positive on Chinese stocks citing attractive valuation. The change in sentiment is underpinned by the easing of regulatory crackdown and government’s efforts to boost the economy. Going ahead, China’s market could attract a higher share of flows earmarked for emerging markets (EMs), say experts. Also, some funds could reallocate from other EMs to China. This could pose fresh headwinds for markets such as India, which commands a steep valuation premium compared with other EMs.

Will LIC find buying support?
 

Shares of LIC, down 25 per cent over their IPO price of Rs 949, could come under some under fresh selling pressure on Monday as the 30-day freeze on shares held by anchor investors has ended. Anchor investors hold over a fourth of LIC’s public float. “Some anchor investors had to subscribe to more shares than they intended to. This was due to lukewarm demand and last-minute cancellation of a bid by one FPI. Selling pressure from domestic funds can’t be ruled out,” said an analyst. Market players say this week will be the litmus test for LIC on whether LIC finds buying support from institutional investors, such as mutual funds, at these lower valuations.

Dairy stocks on investors’ radar

Dairy stocks are likely to gain as companies in this space have raised milk selling prices by 5-8 per cent during the past five months. Analysts said dairy firms need to raise prices again in coming quarters to pass on higher milk procurement prices. However, with higher inflation and likely better volumes with higher sales to hotels, restaurants and catering, the revenue growth is likely to remain strong. "Considering the strong return ratios and growth potential, we remain positive on the dairy sector. We also expect migration from unorganised to organised sector to steadily generate value," said a note by ICICI Securities. Heritage Foods and Dodla Dairy are among the stocks expected to gain.