You are here: Home » Markets » News
Business Standard

Foreign investors pour $6 bn into India stocks despite sinking economy

Foreigners have remained net buyers even after data Monday showed India's economy shrank by a record 23.9% in the June quarter

Topics
Foreign investors | Indian Economy | Markets

Nupur Acharya | Bloomberg 

Markets continue to rally on RBI policy fillip; Sensex rises 164 points
For the bulls, there remain plenty of reasons to be optimistic about Indian shares.

India’s shrinking economy is not stopping from pouring money into the nation’s stocks betting on a recovery.

International buyers plowed a net $6 billion into shares in Asia’s third-largest economy in August, the most since March last year. That’s as all other in the region excluding China suffered net withdrawals during the month.

Part of it is a bet that Indian equities will play catch-up after trailing the region’s benchmark so far in 2020: the S&P Sensex has underperformed the MSCI Asia Pacific Index by about 6.5 percentage points. Foreigners were also drawn to share sales by some of India’s marquee financial firms -- Ltd., Axis Bank Ltd. and mortgage lender Housing Development Finance Corp raised a combined ($4.7 billion) last month.

“We place India at the top of the list with China for investment returns over the next 12-24 months,” said Nuno Fernandes, who helps oversee more than $2 billion in emerging-market assets at GW&K Investment Management LLC in New York. “India equities represent one of the fastest growth areas in the world.”

Foreign investors pour $6 bn into India stocks despite sinking economy

Foreigners have remained net buyers even after data Monday showed India’s economy shrank by a record 23.9% in the June quarter, putting in a net $231 million in the first three days of September. Helping them look past the grim GDP data is the improvement in business activity from July after the lockdown curbs were eased.

“We need to look beyond the near term and consider companies that will benefit from the normalization of economic activity and demand,” said Amit Goel, a fund manager at Fidelity International. Goel, who oversees $1.6 billion in India Focus Fund, said he bought shares of private banks, a large staples company and health-care firms in the past three months.


Foreign investors pour $6 bn into India stocks despite sinking economy

Still, rapidly rising virus cases have put a dampener on investor confidence. With the number nearing 4 million, India is becoming the world’s new virus epicenter.

“As long as Covid-19 cases continue, localized lockdowns are likely to hinder an economic recovery,” said Kristy Fong, senior investment director for Asian Equities at Aberdeen Standard Investments. Aberdeen has turned “more defensive” as it expects a “patchy rather than a V-shaped recovery,” she said.

For the bulls, there remain plenty of reasons to be optimistic about Indian shares.

“The worst is behind us and we’re steadily heading toward a recovery,” Amit Shah, head of India equity research at BNP Paribas said in a note Thursday, citing improving auto sales, plentiful rains that will improve rural wages and the central bank’s easy monetary policy. BNP expects the Sensex to end the year at 41,500, 8% higher from Friday’s close.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sat, September 05 2020. 10:47 IST
RECOMMENDED FOR YOU