Even as FIIs continue to pump in money ahead of the Lok Sabha election results, Timothy Moe, Chief Equity Strategist at Goldman Sachs notes that India is currently the most favoured market for investors after China, given the improvement in its micro and macro position.
There was a significant foreign selling last year of about $ 5-6 billion in India, but from a very low base, they began to come back which is reflective of the fact that the broader market situation has improved. Further, some signs specific to India at micro and macro level have significantly improved, Moe said in an interaction with ET Now. He added that the risk to reward from foreign positioning standpoint is to the upside.
“Empirical data shows foreign investors have been quite overweight about India for many years and gradually they brought back to slightly above neutral. They were going from 600 basis overweight which is quite a lot to slightly above neutral or 100 basis points overweight,” said Moe adding that the foreign investors have got a better base to re-engage if they begin to become more constructive.
When asked about his outlook on quarterly earnings, Moe said the earnings will pick up this year and next year at 16% and 14% respectively. Going by the recent earnings trends, he said the third quarter of FY19 was the best in the last sixteen months which gives hope that the earnings will improve going forward and are beginning to stabilise.
Talking about the pre-election rally, Moe said the markets have partly priced in the return of current administration but still there is a room for improvement as election results are still a month away. He added that going by the past trend, the market rallies before the elections for some profit booking and then stabilizes after the voting results.
India’s structural growth is very attractive on a five years basis. It is the rapidly growing economy as all the core ingredients for growth are available in abundance and there is still a potential for capital investment, Moe said.
On global growth, Moe said owing to the recent US yield inversion there were fears about global slowdown but after the US and China strong data, people are becoming confident about the revival of the global growth cycle.