Series 50 – Investing in Market Highs – What will attract FII’s to India and where did our return come from?

Last week we had shared an interesting article that portrayed a compelling view in terms of economic and investment landscape on how India is an appealing market for investments for domestic Investors. This week considering some points highlighted to us on the suitability of current market levels for investment and whether India presents an expensive investment opportunity at this time, we’ve extracted a brief excerpt from our Quarterly call that discusses the global market outlook and India’s returns profile and why India will be a compelling market for FII’s to look for.

Here’s a quick overview of how the Global Indices fared. Looking at the data, we observe that India wasn’t the top-performing index in 2023. Indices from the USA, Brazil, Latin America, Russia etc outperformed India. However, what stands out is India’s strong and consistent performance over the past three years with comparatively lower volatility. Despite being an emerging market, FIIs are more willing to take risks and invest in India, considering the country’s stable earnings growth and steady policy framework at the top.

Total returns that we generate will be a combination of earnings growth and PE re-rating that the market offers. When we are positioned in companies with good earnings growth, the market will benefit us with a PE re-rating based on sentiments, flows and liquidity. Hence PE re-rating is an outcome of these three factors and can’t be quantified. Below data of Nifty 50 depicts that India’s three-year returns are in line with earnings growth, indicating that the market hasn’t yet experienced a PE re-rating. This brings to the conclusion that India’s market valuation is neither cheap nor expensive, and there are areas of growth we should focus on for investment. In constructing our clients’ portfolios, keeping these in mind, we focus on the sectors that contribute significantly to GDP, such as Manufacturing, Auto, Capital Goods, Power, Pharma.

The recording to our quarterly call is available in the below link and we have explained about the above data between 03:21 Minutes to 05:50 Minutes. You may click the below link to listen to it –

Itus Capital Annual Investor Call 2023 – YouTube