As the Indian domestic market achieves new record highs, buoyed by the saffron wave in state elections, Nilesh Shah, from Kotak AMC, expresses strong optimism about India’s growth trajectory. In an interview with Moneycontrol, he shares insights into the equity market’s direction, changing dynamics for Foreign Institutional Investors (FIIs), and sheds light on India’s positive momentum.
Q: How surprised are you with the election verdict, and where do we go from here?
The market is pleasantly surprised by the election verdict, reinforcing confidence in the continuity of governance until the 2024 general election. With the second-quarter GDP numbers surpassing expectations and analysts maintaining earnings projections, the market responded positively.
Q: Do we continue with this positive momentum until the elections?
The momentum is certainly in India’s favor. While short-term concerns about valuation exist, India is poised to become the third-largest economy between 2027 and 2032, overtaking Germany and Japan. Although India may seem expensive on a one-year basis, it appears to be the cheapest emerging market on a five-year horizon.
Q: Will private capex move to the front end in the next six months?
There could be urgency in private capex plans as election uncertainty looms. Factors such as high capacity utilization, strong corporate cash flow, and low leverage create a favorable environment for setting up additional capacity, albeit with variations across sectors.
Q: Does the election result decisively change the course of foreign investors?
Foreign portfolio investors (FPIs) display diverse behavior. Long-term FPIs may maintain their plans, while those who offloaded positions earlier might re-enter the market. Global investors are also reconsidering India over China due to higher returns and a more promising growth outlook. Collaborations with global indices companies to increase India’s weight further attract foreign investments.
Q: With FII ownership at a decadal low, is this the bottom, and could we see a sharp resurgence?
While FPI ownership in listed equity has decreased, considering both listed and unlisted spaces along with increasing foreign direct investment provides a more comprehensive picture. Despite the decadal low in FPI ownership, global capital is expected to flow into India as long as attractive investment opportunities are presented.