CEO of Kotak Securities: Foreign Investment in India Underperforms Against Its True Potential
Foreign investment in Indian markets currently represents just a fraction of its potential, with many investors holding off for a market correction and lower valuations, according to Pratik Gupta, CEO and Co-Head of Institutional Equities at Kotak Securities.
Gupta noted that global investors have largely stayed on the sidelines, leading to minimal capital inflows compared to what could be invested. Many are looking to other markets like China, planning to return to India once valuations stabilize.
While Indian markets are viewed as expensive—particularly in segments like micro caps, SMEs, and small caps—Gupta emphasized that there is no bubble. He stated, “The broader market is expensive, but it’s not in bubble territory.” Over a 3-5 year horizon, equities are expected to outperform fixed income, even if they seem pricey in the short term.
This year, foreign portfolio investors have injected Rs 91,708 crore into Indian equities, reflecting fluctuating levels of buying and selling, while NSDL data indicates total investment in 2023 reached Rs 1.7 lakh crore.
Gupta highlighted that global funds, once cautious about Indian valuations, now feel they may have missed out as the markets have continued to rise, buoyed by retail and domestic institutional investments. “Retail and domestic investors have shown remarkable resilience,” he said, pointing to strong interest from foreign investors in IPOs, QIPs, and block deals.
Despite uncertainties such as election results and potential increases in capital gains tax, bullish sentiment in India’s stock market remains intact.
Gupta categorized foreign capital inflows into various groups. Sovereign wealth funds from Asia and Europe are making significant investments, particularly in select sectors. However, global emerging market funds are not attracting new inflows, as investors continue to favor the US markets.
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