Growing geo-political concerns have made Indian markets more attractive, at least in short-term, among BRIC nations, say analysts. According to them, foreign flows may top $50 billion by FY15, if the government walks the talk with regards to implementation of key economic reforms.
Benchmark indices rose to their fresh record highs with both the Sensex and the Nifty surpassing its previous lifetimes highs hit back in July. The S&P BSE Sensex hit a fresh lifetime high of 26,406.92 and the Nifty recorded fresh high of 7880.50 in trade on Monday.
The Indian markets have rallied by around 30 per cent in US dollar terms and over 24 per cent in rupee terms so far in the year 2014, largely led by strong inflows by FIIs, which have already pumped in over $26 billion so far in the year 2014.
From an FII perspective, they are really bullish on the Indian economy and rising geo-political concerns have diverted fresh flows to Indian markets from Russia, say analysts.
“There is significant amount of FII money which is coming in the last few days and this trend is going to continue predominantly driven by the fact that money is moving out of Russia and the BRIC funds are bringing the money into India,” said Sudip Bandyopadhyay, President, Destimoney Securities.
“So it is just sell Russia buy India, that is the kind of thing happening for a lot of these funds and that money is reaching India and that is probably taking the market to different levels,” he added.
The Indian equity markets have been the biggest recipient of FII flows among emerging markets this year despite recent geopolitical tensions, swirling speculation regarding interest rate normalisation by the US Federal Reserve and surging US dollar, ET reported.
As a result, India’s weightage among the regional funds such as BRIC’s fund, Asia-Pacific Fund and Emerging Markets has reached a significantly higher level than its historical average, added the report.
“Russia has become risk now and on the other side India is better placed in BRICS countries,” said A K Prabhakar, Independent Market Expert.
“It looks like FIIs are turning sellers in Russia on geo-political concerns, which is favouring the Indian markets,” he added. Prabhakar expects the Nifty to hit a target of 8500 by the next month-end and 9200 by December-end.
EPFR Global tracks both traditional and alternative funds globally and has $23.5 trillion in total assets. Experts believe that the absolute majority government in India will help attract more foreign investments and reduce bottlenecks in policymaking.
Expressing optimism on Indian markets, Adrian Mowat of JP Morgan said that India is likely to outperform most emerging markets (EMs) in 2014. “I expect EMs to give 10% returns in 2014. I remain overweight on India and recommend a large exposure to the market,” Mowat told ET Now.
FII flows may top $50 billion by FY15
Markets have so far rallied on hope and investors are waiting eagerly for implementation of key economic policies by the new government, to revive economic growth. Additionally, macros have improved substantially which also augured well for the Indian markets.
Foreign institutional flows, which are largely responsible for over 24 per cent rally seen in the Indian markets, are showing no signs of slowdown and if the government walks the talk, the flows may top $50 billion by FY15.
India, which was once burdened with the issues of high inflation, rising fiscal deficit and muted economic growth, is back on investment radar of big foreign institutional investors (FIIs) and is no longer part of ‘fragile five’, say analysts.
“India over the last 15 months or so has turned around dramatically. Back in May 2013, India used to be a part of fragile five where the deficits were higher, where the inflation was higher, where the currency was weaker and the equity markets were coming down,” said Devendra Nevgi, CEO, ZyFin Advisors.
However, the scenario has completely changed now. “We are into a situation where we are a part of fabulous five. The currency has stabilised, the current account deficits have come down and the fiscal deficits have come down,” he added.
From an FII perspective, they are really bullish on the Indian economy. They would probably continue to invest into India till the time the reforms are there and the implementation of the same is on the ground and the growth prospects remain high.
Yogesh Nagaonkar, VP, Institutional Equities, Bonanza Portfolio Ltd, is positive that FIIs will pump in $50bn in total by the end of FY15. India enjoyed a flood of FII money because of a change in the government and India looks better placed than most emerging markets.
As per latest data, FIIs have more than 25 per cent stake in 21 Nifty stocks. Their holding is at a 2-year high in 22 Nifty stocks.
They can further invest an additional $140 bn in Nifty stocks ($175bn in BSE 100 stocks) to meet the ownership limits set by the Govt, RBI & corporates, ICICI Securities said in a note.
“FIIs were putting in money even before the elections and are now even more optimistic about the steps taken by the new government for revival of the economy,” said Jayant Manglik, President – Retail Distribution, Religare Securities Ltd.
“They are also pinning hopes on improved corporate performance. India is an important investment destination for them among emerging markets. It shows in the investments made this year. The target of $50 billion of investment seems realistic to us provided India is able to walk the talk,” he added.
COCA-COLA BOTTLERS TO INVEST RS510 CR IN HARYANA
Coca-Cola bottling firms Kandhari Beverages and Enrich Agro Food Products on Tuesday said they will invest Rs510 crore in Haryana to add new manufacturing lines. The authorised franchise bottlers of Coca-Cola India, inked a pact with the State Government to expand their manufacturing infrastructure.
“A fresh, combined infusion of Rs510 crore will create an additional direct employment for 325 people,” both the companies said in a joint statement. As a part of the pact, Kandhari Beverages will invest Rs300 crore to set up multiple high speed manufacturing lines for juice, energy and sparkling drinks at Saha in Ambala and will be completed by 2018.
Enrich Agro Food Products will invest Rs165 crore to set up a new manufacturing line for beverages in Rohtak by 2018 and also invest Rs45 crore in a packaging unit for Coca-Cola.
Kandhari Beverages Pvt Ltd Executive Director Bikram Kandhari said: “This investment which will be utilised to enhance infrastructure in our bottling facilities and setting-up new manufacturing lines.”
Uber to Invest Rs. 120 Crores in India
Taxi-hailing app Uber on Tuesday signed a pact with the Haryana Government, wherein it will invest Rs120 crore in technology based ride-sharing services. The memorandum of understanding (MoU) was signed at the Happening Haryana Global Investors Summit 2016.
Under the agreement, Uber will invest in technology based ride-sharing services, which includes peer-to-peer transportation using private vehicles where the driver is reasonably compensated for expenses, tolls and other related costs.
Uber said this new form of reliable and convenient urban mobility will help create a real alternative to car ownership. Uber will also collaborate with the Government in creating smarter cities in Haryana.
“Haryana has been a leader in promoting information technology and we are excited to launch private vehicle ride-sharing to promote urban mobility, prevent pollution and reduce the time spent in traffic in our cities,” Vijayendra Kumar, Secretary IT, Haryana said in a statement.
FM Arun Jaitley rolls back Budget proposal to tax EPF withdrawal – Big win for salaried class!
New Delhi: In what will bring cheers to millions of salaried class individuals in the country, Finance Minister Arun Jaitley on Tuesday rolled back the controversial budget proposal to tax EPF withdrawals.
Taking the first opportunity available, he made a suo motu statement in the Lok Sabha in which he also announced withdrawal of imposing monetary limit for contribution of employers to provident and superannuation fund of Rs 1.5 lakh for taking tax benefit.
He however stated that 40 percent exemption given to National Pension Scheme (NPS) subscriber at the time of withdrawal remains.
“In view of representations received, the government would like to do a comprehensive review of this proposal and therefore I withdraw the proposal,” Jaitley added.
Clarifying government’s stand on EPF in Lok Sabha, Jaitley said, “The main argument is that employees should have choice of where to invest. Our intention was to encourage more and more employees join the national pension scheme”.
Jaitley in his Budget for 2016-17 had proposed that 60 percent of the withdrawal on contribution to employee PF made after April 1 this year will be subject to tax. This would apply to superannuation funds and recognised provident funds including EPF.
This was criticised by all employees unions as well as political parties.
The proposal would not have impacted 3.26 crore EPFO subscribers drawing statutory wage of upto Rs 15,000 per month. Employees Provident Fund Organisation (EPFO) has a total subscriber base of 3.7 crore.
(With Agency Inputs)
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