JPMorgan expects foreign investors to buy Indian stocks

investmentnews.com:

Indian equities are poised to lure more foreign inflows after the general elections, with the economy’s promising growth prospects and the Federal Reserve’s rate cuts acting as catalysts.

That’s the view from Rajiv Batra of JPMorgan Chase & Co., who says global funds’ positioning in India’s $4.3 trillion stock market remains light and investors will use any correction as an opportunity to increase holdings. His views come as overseas flows have become more volatile ahead of the national vote amid concerns over stretched valuations.

“Foreign investors who didn’t increase relative positioning in India over last 2-2.5 years waiting for this clearing event, will start focusing back on growth-driven policies or reforms,” Batra, an Asia strategist at JPMorgan, wrote in an email interview.

JPMorgan joins Goldman Sachs Group Inc. in predicting more inflows as Prime Minister Narendra Modi is widely expected to extend his decade in power. A third term for the leader is seen promising a continuation of market-friendly policies, spending on infrastructure and a push for foreign direct investment.

India will hold general elections over six weeks from April 19, with votes to be counted on June 4.

Investors will keenly be watching the seat-sharing arrangements if Modi’s ruling party retains power, said Singapore-based Batra, adding that policy continuity is essential for India’s market to sustain its higher valuation or “even witness further multiple re-rating.”

Batra said that rising investor interest in India is forming a “virtuous cycle” of liquidity, sell-side coverage, investor participation and capital issuance.

“We estimate that if all benchmarked investors (EM, Asia ex-Japan, global ex-US and global) simply close their