Cheap Valuations Lure Funds To Indian Equities

Hong Kong, July 30: | Updated: Jul 31 2002, 05:30am hrs
The risk of war often provides investors with the best opportunity to buy cheap assets. India is no exception to this old rule.

Foreign fund managers say, now is the best time to buy Indian equities, which were sold by panicky investors earlier this year during a tense military stand-off over Kashmir.

“We believe that the risk-reward of investing in the Indian market at this point is favouring the investor,” Roland Wee, a fund manager at ING Investment Management, said in a recent client note. “History also shows us that war is the best time to invest, as you get to buy good companies really cheap and reap the gains later when the war or fears of war eventually subside,” he said.

ING Investment manages about $30 billion of assets in Asia outside of Japan and is overweight on Indian equities.

Cheap valuation of the domestic stock market, bright corporate earnings outlook and easing of tension between New Delhi and Islamabad are pushing many fund managers to go overweight on Indian equities against relative benchmarks.

“The valuations look attractive and the outlook is positive. We are overweight on PSUs like oil and gas companies and some of the consumer stocks,” said Devan Kaloo, fund manager at Aberdeen Asset Management in Singapore. The price-earning ratio of the Indian market is estimated at about nine times in 2002, below the average of 12.7 times for Asia-Pacific.