India is back with a bang on FIIs mind: Sumit Jain, ASK Investment Managers

Nifty 12-month forward PE is around 23 per cent below peak. Indian equities should find support from robust earnings outlook owing to strength in the domestic economy.

The going has been good for the Indian stock markets in the last few weeks. SUMIT JAIN, deputy chief investment officer at ASK Investment Managers, in conversation with Puneet Wadhwa, says that the Indian equities should find support from robust earnings outlook owing to strength in the domestic economy. Edited excerpts:

Is the worst of the inflation and rate hike cycle getting over globally, or are the markets being too optimistic?

There has been a broad-based softening of inflation from the recent peak levels – in India and globally. The drivers of high inflation have started to turn. Globally, commodities prices, including energy, have come off. The supply chain situation has fast normalised, agri prices are off from their highs. Going forward, we may see moderation in services inflation as well. While the possibility of rate cuts may still be away, absence of rate cut itself should help prevent further de-rating in markets and prices should grow in line with earnings growth expectations.

Will the Indian equities be able to outperform their peers?

 

After a sharp outperformance, India underperformed the emerging markets (EMs) initially at the start of the year. That underperformance has reduced meaningfully, and India is back with a bang in the minds of international investors. Timely correction in the Indian markets, coupled with continued earnings growth by India Inc and a rally in EMs led to drop in valuation premium. This should lead to reduced headwind versus EMs – supportive of foreign flows as well.