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In what could be soothing to Indian investors, a survey by Bank of America-Merrill Lynch found that India is still a favourite for global investors. However, the recent India summit conducted by Morgan Stanley on June 10 and 11 indicated a cautious stance of investors.
“The 25 per cent growth in attendance at our summit indicates that investors are still engaged with India’s long-term story. We think it is possible that there is cash on the sidelines waiting to come into the stock market. Whether this money ultimately reaches India’s shores depends on how macro and micro growth pans out in the coming months,” Morgan Stanley said.
Prone to US moodsOn the other hand, DBS Group Research feels India is a sell on every rally. According to it, Emerging ASEAN and India are mostly impacted by US rate hikes and growth slowdown. “We are downgrading Indonesia and India to underweight and recommend selling into the rebound,” DBS said.
“Despite having lost 14 per cent (in $ terms) since January highs, India continues to be the most favoured country for global emerging market (GEM) investors,” the BofA-ML survey said.
According to the report, Asia-Pacific investors increased net overweight allocations to India and Taiwan in June. However, sentiment towards China and Hong Kong fell as the net overweight for China fell and investors moved net underweight on Hong Kong. Thailand aside, ASEAN remains unloved by investors, the survey revealed.
Fed rate hike in SeptMore global investors now believe that the US Federal Reserve will increase rates in September. Fifty four per cent of global investors expect the Fed to raise rates in September, up from 45 per cent last month, BofA-ML said. The survey was conducted between June 5 and 11. In all, 167 participants with $437 billion in assets responded to the survey.
On the other hand, the DBS strategy team believes India should not be spared from a general slowdown in the global environment. “Recent export growth dropped for a fifth straight month, factory output slowed to a five-month low and bad loans at banks are estimated to rise to the highest since 2001.”
Near term, exasperated investors could shift allocation from India towards China where investors are still underweight, it added.
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