‘India among best emerging markets to invest in’ :: Business Line

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A majority government keen on bilateral pacts helps, says Damania of IDFC Securities

The government’s thrust on bringing in fresh foreign investments, its majority mandate, and lower international commodity prices have once again given India a unique opportunity to attract  foreign portfolio flows, says Anish Damania, Head - Institutional Equities, IDFC Securities, in an e-mail interaction with BusinessLine. Excerpts:

How is the mood among foreign portfolio investors? Do you sense a feeling of restlessness about the performance of the Modi government?

 The foreign portfolio investors (FPIs) we met at the IDFC Global Equity Conference were positive on India and willing to give some more time to the government.

Many important Bills, such as the Insurance Bill and amendment to Land Acquisition Bill, are expected to be passed soon. Further, there is expectation that a broad consensus on GST will be arrived at.

Also, there are expectations of changes in bureaucracy to aid faster decision making.

CEOs and business leaders were extremely confident of India achieving higher growth. In fact, many expect the investment cycle in the country to pick up sooner rather than later.

Most of them also agree on the fact that India will grow at a pace much faster than other large economies over the next few years.

The Centre’s thrust on signing bilateral agreements with several countries, its majority mandate, and lower international commodity prices have once again given India a unique opportunity to attract  large international investments.

Many companies conceded that while they were very hopeful and confident, activity has not yet picked up at the ground level. Some investors did reflect this concern, though they continue to view India positively.

How do you think India compares against other emerging markets in FPIs’ view?

Most FPIs indicated that India is among the better destinations to invest in, in the emerging market universe.

Many are awaiting the Budget to understand how the Centre plans to take its reforms and growth agenda forward.

The government, on its part too, has indicated at various forums that the forthcoming Budget would be the key event to watch out for.

That the ongoing turbulence in emerging market currencies and economies post the oil price collapse will have a spill-over effect on India, is a view reflected by many investors. However, they are quick to add India still remains a market where there is hope of a change for the better.

What category of FPIs is coming into Indian stocks now? Are they sovereign wealth funds, hedge funds or pension funds?

Our interaction continues to suggest that India-dedicated funds are not yet getting any sizeable funds, but it continues to be the same set of money managers which continue to get flows (typically regional/global funds, pension funds and sovereign wealth funds).

Hedge funds are active on the basis of change in allocations in favour of a country.

Is Indian debt also attracting a lot of investment by FPIs? Do you think this flow is sustainable?

FPIs have bought debt worth $26 billion so far and month to date they have already bought debt securities worth $1.8 billion, implying that the interest in Indian debt continues to be strong.

Till the time the interest rate expectations continue to slide, inflow will continue.

We saw churn from defensives to cyclicals in 2014 as investors bet on economic recovery. Which themes do you think will investors flock to in 2015?

We continue to believe domestic cyclical recoveries will continue to play a dominant role. Banks and asset-based stories with reasonable gearing will be the ones which will play themselves out in FY 16.

What is your outlook for Nifty and Sensex returns in 2015? Will you prefer large-caps only or do you still see some value in mid-caps?

Our Sensex target continues to remain at 26,900 till March 2015. We are yet to formalise a view for FY16 on Nifty and Sensex targets.

At this point of time, with some turmoil in the commodity prices and EM currencies, we would prefer to increase bets on large-cap liquid companies over mid-cap.