WILL CHINA’S LOSS SPELL LONG-TERM GAIN FOR INDIA?

Monday’s global stock crash is likely to increase FII inflows into India.

According to foreign funds and large brokerages, India may well turn out to be the best bet in the emerging markets club.

While it still early for large foreign institutional investors (FIIs) to take calls on the issue, according to a cross-section of foreign brokerages, most investors remain bullish about India.

“This is just a reverberation of the global emerging markets (EM) problem. India does not have an idiosyncratic issue and has been a stellar outperformer,” said Ridham Desai, MD, Morgan Stanley India. “Once the dust settles on global volatility, India should resume its uptrend. I don’t think there is widespread belief that India is in the grip of a bear phase,” he added.

On Tuesday, a day after markets plunged 1,625 points, the Sensex clawed back to rise 291 points. However, Chinese and Hong Kong markets fell by about 7% each. Indonesia’s stock index, which recovered on Tuesday, has fallen 20% so far this year. Malaysia’s stock index fell 1.9% on Tuesday.

India’s weightage in the MSCI or emerging market index is likely to go up due to a clubbing of different categories of foreign investments. Other emerging markets, including Brazil and Russia, have been hit by falling oil and commodity prices.

“Very few emerging market countries are enjoying the kind of growth India is posting,” said Tai Hui, chief market strategist, JP Morgan AMC. “On currency, India is more resilient than other EMs. FDI inflows have increased. In EMs, India is still one of my preferred markets,” he added.