Valuations are more attractive in other emerging markets as compared to India: Axis Mutual Fund

By: |
October 04, 2017 5:53 PM

Just days after Marc Faber said that he is moving his positions to China, given the run-up in Indian markets, Axis Mutual Fund says that the Indian markets are overvalued, and other emerging markets provide a better opportunity for Foreign Institutional Investors.

“If earnings don’t catch up, ultimately it will become difficult for markets to move on beyond a point,” Jinesh Gopani of Axis Mutual Fund says. (Image: Reuters)

Just days after Marc Faber said that he is moving his positions to China, given the run-up in Indian markets, Axis Mutual Fund says that the Indian markets are overvalued, and other emerging markets provide a better opportunity for Foreign Institutional Investors. In an interview to ET Now, Jinesh Gopani, Head of Equity at Axis Mutual Fund said, “If you look at the emerging markets, money is moving out from India to other destinations as valuations are more attractive in other emerging markets as compared to India. Earnings have to catch up. If earnings don’t catch up, ultimately it will become difficult for markets to move on beyond a point.”

 The expert pointed out that the Indian retail investors have been holding the fort in the last 3-4 months, even as FIIs have remained net sellers. “Sheer liquidity moving the markets for the last 3-4 months, and that too only the domestic liquidity, will not go well. Because of GST and other massive resets happening in the in economy, I think Q2 will be more truncated. You will not have overall good numbers across the sectors, across the companies,” he told the channel.

In conversation with CNBC, Marc Faber, who had till recently maintained that India is his preferred destination for investing said, “I think if you look at the major markets here in Asia, India and China, India is up close to 30% in dollar terms, and China hasn’t gone up a lot. So, I think some money will be taken off the table in India and move into China.” Speaking specifically about his positions, he told the channel, “I also increased my positions in China.”

According to Jinesh Gopani, there are various macro factors at play, contributing to the overall negative sentiment of FIIs towards investing in India. “Some macro factors are against our favour for the time being, be it oil or rupee depreciation and the GDP slowdown because of various factors. I think all this has been taken as negative indicators by FIIs and they have been continuous sellers in the markets for the last three months, as they have options for to go for other emerging markets than India,” he told in the same interview.

After FIIs sold Rs 15,000 crores in the month of August, the highest sell-off since last November, Angel Broking says that the trend is likely to continue. The firm attributed the outflow to a combination of geopolitical uncertainty and weak earnings season in the June quarter.

 

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