‘FPI selloff not due to poll jitters… other markets seem more attractive’

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MUMBAI: Foreign funds are selling Indian equities not because of election uncertainty but because they find other markets more compelling, and D-St valuations are providing them an exit opportunity, said HSBC India CEO Hitendra Dave.
On Monday, FPIs were net sellers, offloading shares worth Rs 4,499 crore in the capital markets. This came on the back of over Rs 18,000 crore worth of net equity sales by FPIs this month.At the same time, foreign funds are investing in China, where prospects have improved after Beijing announced economic stimulus plans.
“The general sense is that it looks like a normal election with no major shift in public opinion. I know there is a lot of chatter about volatility, why foreigners are selling, and whether they know more. I think it is just the nature of markets. There are other markets that foreign investors find more compelling, and the Indian market is providing them with the exits,” said Dave, speaking to TOI.

According to Dave, foreign investors, unlike domestic ones, have the strategic advantage of choosing markets. They compare the cost-effectiveness of investments, weighing the risk-adjusted returns of different markets. “They can compare a steel plant in India with plants elsewhere and opt to invest in the one more promising on a risk-adjusted return basis. Because India is, relative to other markets, more expensive, you are seeing this,” he explained.
While the price-to-earnings of Indian shares remains relatively high, recent days have witnessed extreme volatility, with the sensex moving 1,000 points intraday on several occasions. “I think we should not get too obsessed with the short term. The reality is that over the long term, Indian stock markets have given better returns than most markets, barring the US in dollar terms,” said Dave.
“We need to become a centre of excellence for some industries. We need to find 5-6 items which the West buys and be the best in those products,” he said.

This article was originally published by a timesofindia.indiatimes.com

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