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China could spoil India’s FII party; like banks: Udayan

It has been a year of stellar bull run for Indian equities. The long-term India growth story backed by the new government’s efforts to turnaround the economy is selling among foreign investors like hot cakes. According to CNBC-TV18’s Udayan Mukherjee, the inflow of foreign funds into the Indian market is likely to continue next year as well. While there is no evidence or cue in sight that FIIs will back out of India in a hurry, China could spoil the FII party for India, he cautioned.  

China’s outperformance against peers is getting more pronounced now. Foreign investors have made money both in India and China, so a portfolio shift from India to China seems to be the only worry, he said. Start of the next year better would be a better time to analyse FII flows, but one should keep an eye on China, he added.

According to a HSBC report, foreign institutional investors pumped USD 5.3 billion in Asian equities in the month of November, out of which India attracted USD 1.4 billion. However, China reclaimed the top slot as the ‘most loved’ market, pushing India down to second position in the region.

Meanwhile, Mukherjee recommends traders to follow the market trend with caution. For investors, he suggests shuffling portfolios. The broader market is performing better. Stick to high quality stocks and buy on dips, he added.  Further, passive investors can consider index funds.

On sectors, he is bullish on banks and high quality consumer-driven stocks. These sectors have started outperforming the market in the past few trading sessions. Global investors always look to buy banks. One will rarely find a FII portfolio without banks, he added.

The ongoing fall in global crude oil price has triggered a rally in tyre, paints and other stocks that use this commodity as a raw material. According to Mukherjee, the tyre and paint stocks have run-up too much and large part of the rally is already in the price already. However, he sees some more juice in oil marketing companies (OMCs) from a valuation perspective.

As far as global cues are concerned, he is closely watching the developments in Europe.

For the complete analysis watch the accompanying video

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