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Foreign Investors bet big on Indian Banking on resilience
June 16, 2023
Most foreign institutional investors from the key US and Europe region have grown optimistic about India, which is reflected in the swinging fortunes of equity flows to the Asian country.
According to UBS, more than 50 FIIs have expressed their positive outlook on India, resulting in equity flows recovering to $9.5 billion since March 2023. This rebound comes after a $4 billion outflow from India in the previous three months, amid China’s reopening and negative news regarding certain Indian corporate groups.
“India’s sustained economic momentum despite the fading reopening tailwinds was a bit of a surprise. However, most FIIs agreed that on-the ground recovery remains uneven whether looked at in terms of the rural-urban dichotomy, manufacturing versus services growth or affluent versus lower income household demand,” UBS said in a report.
Global investors have also largely priced in Prime Minister Modi winning the upcoming parliamentary elections in April/May 2024, while the outcome of state elections in the December 2023 quarter is expected to have limited impact, the bank said.
Despite underperforming emerging markets by 4.6% this year, India is still trading at a premium of around 62% on a 12-month forward price-to-earnings (PE) basis, UBS said.
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