India will gain the most when emerging market flows pick up, says CLSA’s Vikash Jain
Even as FPIs sold shares in some recent months, India-dedicated funds remained consistent buyers and going ahead, the share of such money in the overall FPI pie will rise significantly, says CLSA India Strategist Vikash Jain
- Dec 15, 2023,
- Updated Dec 15, 2023 11:19 AM IST
Even as foreign portfolio investors (FPIs) have resumed buying in the Indian stock markets with December seeing net inflows of $4.7 billion, the depth and breadth of the domestic market is expected to attract a higher quantum of India-dedicated funds in the near future as an increasing number of global funds look at the emerging markets while turning cautious on China.
According to CLSA India Strategist Vikash Jain, even when FPIs were selling Indian shares in some months this calendar year—cumulative net selling by foreign investors in September and October was over $4.7 billion—India-dedicated funds were consistent buyers.
“The consistent thing that we have seen in the last 7-10 months is that India-dedicated foreign money has been consistent buyers. So, there is India-dedicated money that is rising in the pot,” said Jain.
“India dedicated money will typically go deeper in the market and that is also the reason why mid- and small-caps are rising. That is a fundamental change that would happen. Right now, non-India dedicated is pretty big and this will happen gradually but that is where we are going. That is something that we will see in the rest of this decade,” he added.
According to Jain, India is a stock picker’s market, which is well-diversified with a good representation of all sectors within the benchmark indices – a fact that he believes has not yet been fully appreciated by the global investors.
“India is a very clear stock picker market but (it is) for people who can handle 20 per cent volatility. If you look at stocks which trade over $10 million in cash every day, India has 230 stocks, which is the fifth-highest in all markets of the world. US, China and Japan are higher than us with Korea only a little higher. India is the market that is expected to grow dramatically to $6 trillion in five years,” says Jain.
“India has such a deep and broad market but it is not concentrated – the top five (stocks) make up only 30 per cent of the benchmark. In Indonesia, its is 70 per cent of the benchmark. India is pretty diversified and most sectors are well represented. This has not been fully appreciated by the flows as 93 per cent of the FPI money that comes to India is not India-dedicated and only seven per cent of the money is India-dedicated money,” explains Jain.
In the current calendar year, FPIs have been net buyers at $17.5 billion, which is a huge turnaround considering that overseas investors were net sellers at $16.5 billion in the previous calendar year (2022).
Incidentally, FPIs were net sellers in each of the months last year between January and June with the cumulative selling pegged at nearly $28.5 billion.
Interestingly, Jain believes that global flows towards emerging markets (EM) will pick up once the dollar eases and India could be the biggest gainer when the tide turns.
“Right now, with the US markets doing well, the dollar rising, and China not doing so well, EM flows have not picked up. If dollar cools off, then that could be the point where people would be looking at putting more money in EM and this time India could be the biggest gainer,” says Jain.
Even as foreign portfolio investors (FPIs) have resumed buying in the Indian stock markets with December seeing net inflows of $4.7 billion, the depth and breadth of the domestic market is expected to attract a higher quantum of India-dedicated funds in the near future as an increasing number of global funds look at the emerging markets while turning cautious on China.
According to CLSA India Strategist Vikash Jain, even when FPIs were selling Indian shares in some months this calendar year—cumulative net selling by foreign investors in September and October was over $4.7 billion—India-dedicated funds were consistent buyers.
“The consistent thing that we have seen in the last 7-10 months is that India-dedicated foreign money has been consistent buyers. So, there is India-dedicated money that is rising in the pot,” said Jain.
“India dedicated money will typically go deeper in the market and that is also the reason why mid- and small-caps are rising. That is a fundamental change that would happen. Right now, non-India dedicated is pretty big and this will happen gradually but that is where we are going. That is something that we will see in the rest of this decade,” he added.
According to Jain, India is a stock picker’s market, which is well-diversified with a good representation of all sectors within the benchmark indices – a fact that he believes has not yet been fully appreciated by the global investors.
“India is a very clear stock picker market but (it is) for people who can handle 20 per cent volatility. If you look at stocks which trade over $10 million in cash every day, India has 230 stocks, which is the fifth-highest in all markets of the world. US, China and Japan are higher than us with Korea only a little higher. India is the market that is expected to grow dramatically to $6 trillion in five years,” says Jain.
“India has such a deep and broad market but it is not concentrated – the top five (stocks) make up only 30 per cent of the benchmark. In Indonesia, its is 70 per cent of the benchmark. India is pretty diversified and most sectors are well represented. This has not been fully appreciated by the flows as 93 per cent of the FPI money that comes to India is not India-dedicated and only seven per cent of the money is India-dedicated money,” explains Jain.
In the current calendar year, FPIs have been net buyers at $17.5 billion, which is a huge turnaround considering that overseas investors were net sellers at $16.5 billion in the previous calendar year (2022).
Incidentally, FPIs were net sellers in each of the months last year between January and June with the cumulative selling pegged at nearly $28.5 billion.
Interestingly, Jain believes that global flows towards emerging markets (EM) will pick up once the dollar eases and India could be the biggest gainer when the tide turns.
“Right now, with the US markets doing well, the dollar rising, and China not doing so well, EM flows have not picked up. If dollar cools off, then that could be the point where people would be looking at putting more money in EM and this time India could be the biggest gainer,” says Jain.