Indian Equities Slide to Six-Month Low as Foreign Investors Exit
Indian equities have been in decline since September, with the Nifty 50 and Sensex hovering at more than seven-month lows. Analysts view this as a “healthy correction” after a long period of growth.
Foreign investors have been exiting their holdings due to concerns about the slowdown in India’s economy. India’s gross domestic product expanded by 5.4% in the quarter ended September, the slowest growth rate in seven quarters. The government has also lowered its economic growth estimates for the fiscal year ending March to 6.4%, the lowest in four years.
Real estate, energy, and autos have been the biggest decliners, with foreign investors withdrawing $8.3 billion from Indian equities as of January 28. Domestic investors, on the other hand, have continued to pour in capital, injecting $27 billion since October.
While the near-term outlook may appear bleak, analysts believe longer-term fundamentals remain solid, and that a rebound is in the works. A number of sectors, including domestic IT and private banking, are expected to attract new investors as valuations become more reasonable.
“Globally, investors are focusing on quality, and valuations in India were getting a bit stretched,” said Venugopal Garre, head of India research at AB Bernstein. “This correction will give them a chance to enter at a better price.”
James Thom, senior investment director at Abrdn, echoed this view, stating, “While there’s a bit of pullback in the near term, I see great opportunity for investors in India in the longer run.”