Foreign investors struggle to keep up with India's rise
Repeats story from Thursday.
India surges toward leading position on EM benchmark
Mid and large stocks have highest PE ratio globally - LSEG
Funds shy of buying deepen underweight allocation
By Ankur Banerjee
SINGAPORE, Sept 5 (Reuters) -India's stock market rally is ramping up its index weighting and creating a dilemma for global fund managers: sit back and watch as their relative exposure shrinks while the market grows, or buy in at increasingly eye-watering prices.
Most find the latter uncomfortably risky and are seeking alternatives, some driving money into India's smaller companies, while others are looking elsewhere at other emerging markets.
The trend has been driven by years of strong earnings in India at the same time as China's markets have stumbled, upending their weightings in the MSCI Emerging Markets' Index .MSCIEF which serves as a benchmark for global EM funds.
India's MSCI EM weight has shot to 19%, up from just 8% four years ago and analysts at Nuvama Alternative & Quantitative Research expect it to top 22% by the end of this year. China's weighting over the same period has collapsed from 40% to 25%, data from MSCI shows.
"The convergence between India and China is causing problems for a lot of portfolio managers because if you had a global mandate or a pan-Asia mandate, you probably were at best equal weight India and probably underweight," said Vikas Pershad, portfolio manager for Asian equities at M&G Investments.
"And that underweight is growing."
Part of the reason for the long-term underweight has been that many investors preferred China's cheaper and dynamic market, while entry and exit costs for funds can be high in India.
Managers would need to buy Indian companies at a rapid clip to keep up with their increasing presence in indexes, which with an average 12-month price-to-earnings ratio of 24 times for big and middle-sized firms are the most expensive in major markets, according to LSEG data.
Many are choosing not to do so, leaving India the biggest underweight allocation among emerging market funds, according to HSBC and Copley Fund Research.
Valuations for Chinese blue chips .CSI300, by contrast, are far lower with the same price-to-earnings measure at 17 and at 15 for big Malaysian stocks .KLSE.
For Gary Tan, portfolio manager at Allspring Global Investments, and his clients, valuations are the sticking point.
"We are optimistic on the long-term story, but really cautious on where valuations are," said Tan, who has been underweight India for the last couple of years.
NO SECRET
Valuations have long been relatively high in India and no barrier to outperformance. Now, however, some investors are becoming wary of the risk-reward balance.
India's Nifty 50 index .NSEI has risen 145% and the S&P BSE Sensex .BSESN has surged 136% since mid-2020, while the S&P 500 .SPX in the same period has gained 78% and China's blue-chip index .CSI300 has slid 22%.
Yet while foreigners have been consistent buyers of Indian stocks this year and in 2023, the flow and sentiment is beginning to shift.
ICICI Securities data shows foreign buying over the first half of this year has been much higher in small to mid size firms than in large caps and in August, exchange data showed foreigners turned sellers of $662 million in shares.
Foreign investors account for roughly 16% of total Indian stocks holding, according to ICICI Securities, the lowest in a decade.
To be sure, there are plenty of bulls and money that isn't benchmarked to emerging markets' indexes that is flowing in.
Howie Schwab, portfolio manager for emerging markets growth at Driehaus Capital, said there's an increased interest from global investors in India, not just from those with emerging markets mandates.
Vivian Lin Thurston, portfolio manager for William Blair's emerging markets growth strategy, says valuation alone is not necessarily reason enough to look elsewhere.
"Do I have another attractive opportunity set to put money in if I take down India, the answer is not many at present, and this is a factor I'm struggling with, or grappling with," she said.
However flows into Malaysia and Indonesia, where markets are on a tear, point to investors looking further afield, for now.
"India's economic growth story is not a secret," said James Cook, investment director for global emerging markets at U.S. fund manager Federated Hermes, who is underweight India and waiting for prices to fall before buying any further.
"When you have such a consensus, and the outlook appears to be benign, investors can fall into a trap, blind to any potential pitfalls, such as paying too high a price to participate."
Reporting by Ankur Banerjee in Singapore, additional reporting by Gaurav Dogra and Bharath Rajeswaran in Bengaluru; editing by Tom Westbrook and Shri Navaratnam
متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔
