In a sign that some foreign investors are losing their enthusiasm for India, they have pulled out more than $1 billion from Indian stocks in the past 12 trading sessions.
A man gestured while watching the Sensex index on the digital broadcast outside the Bombay Stock Exchange in Mumbai.
The Bombay Stock Exchange's 30-share Sensex was essentially flat on Friday but is down 7.8% for the year through Friday, at 19,007.53. Foreign institutional investors have been net sellers over the last two-and-a-half weeks, with a net withdrawal of $1.17 billion
In contrast, last year foreign investors had poured $29 billion into Indian stocks according to data from the Securities and Exchange Board of India. These flows had helped push the Sensex to a 17% gain.
This year investors are increasingly concerned about India's growth, and are at the same time encouraged by an improving economic outlook for the developed world.
Some global money managers are expecting Indian stocks to fare worse this year than some other Asian and emerging countries. A recent survey of global emerging market fund managers released by Bank of America Merrill Lynch this week found that a third were underweight on Indian stocks, meaning they are holding less than their benchmark. This is up from just 10% of the managers being underweight India in November, according to a similar survey.
Foreign investors "are looking to buy more either U.S. stocks, or stocks of countries which benefit from U.S. recovery," says Rakesh Arora, head of equity research at Macquarie Capital Securities (India) Pvt. Ltd.
For instance, South Korean and Taiwanese companies that export products to the U.S. would benefit from U.S. growth, so they may be more attractive options. The Korea Composite Stock Price Index or Kospi is up 2.7% through Thursday while the Taiwan Weighted Index is up 0.5%.
India has been plagued by a range of issues that have created uncertainty about its economic growth. "Inflation is the biggest one," says Prabhat Awasthi, head of equity research at securities firm Nomura Financial Advisory & Securities (India) Pvt. Ltd .
India's food inflation has been rising for several months. Inflation of primary articles rose 17% from the previous year for the week ending Jan 8. Meanwhile, rising oil prices globally are adding to India's inflation woes because it is a large importer of oil.
Rising inflation will likely curb consumer expenditure and ultimately lower sales for Indian companies. On the other hand, as India's central bank raises interest rates to curb inflation, it will become more costly for companies to borrow money for their business. Together, these factors could crimp profits for Indian companies this year.
Nomura expects Indian stocks to provide a "below-average return" of around 12%, according to a report published in December.
Meanwhile, India's political picture has also recently become fuzzy. The federal government has come under pressure in recent months due allegations of corruption related to the telecommunications sector. That and other controversies have distracted the government from pushing reforms. Investors have been disappointed that the government has not invested in infrastructure development as much as they had hoped.
"For the next one month, these uncertainties are going to rule," says Shrikant Chouhan, senior vice president of equity research at Kotak Securities Ltd. Investors will be looking to the federal government's budget to be announced in February to give some clues about the government's plans.
Until then, many analysts expect Indian stocks to remain volatile. However, further losses could make Indians stocks cheap enough to attract some foreign investors back.
Fuente: The Wall Sreet Journal
Estudio AGML : Estudio Contable Impositivo - Gestión de la Calidad