Business
Budget, earnings revival crucial to lure FIIs back to India: Punita Kumar Sinha
Punita Kumar Sinha, from Pacific Paradigm Advisors, shared her perspective on the situation: “Well, it has been a tough year for India and the sentiment remains concerning towards India by foreign investors. I was at Davos and I was also in the US, and the FIIs are not really in a hurry to come back to India for a number of reasons. I am not sure I agree with them. But I am just telling you what the view is and that has played out. As you can see, the first few weeks of the year, beginning this January, India has been one of the worst performing markets as compared to Europe and other markets, and even China has been up. Most markets are up double digits whereas India is down in many—many stocks doubled digits.
“So, the concerns remain around earnings, as to whether India has moved into a lower earnings trajectory. India was a market that was seen as a high growth market, 15% to 20% growth at the minimum across different companies, and now people are seeing between 5% to 10% to 15%, but hardly any companies are expected to do more than 10% to 15%. So, if that earnings trajectory gets reversed and we start seeing companies give stronger earnings this quarter—and we are in the earnings season—that might change the sentiment.
“The second thing, the general consensus view is that India’s valuations are still not low compared to where the earnings… the earnings have derated but the valuations have not derated significantly. So, the view is that PE multiples could be slightly lower before the market looks attractive again. Third, of course, there is concern around what is happening to the trade deals. The EU-India trade deal will be seen quite positively, and I am hoping that that would be a good positive catalyst. I hope the budget would be a good positive catalyst because, in my view, valuations are no longer demanding and are reasonable, and the earnings growth… of course, we have to be selective because there are companies that are giving double digit earnings growth and there are some that are not. Now, India is a very deep and wide market, so it is not easy—I mean one should not just call everything in the same breath because there is a big disparity amongst companies.”
On whether now is the right time to buy given the market pessimism, Sinha clarified: “No, I am not saying the worst is yet to come. In fact, I am saying that one should be buying in the market. One should because I think that the pessimism is overdone. As I said, India is one of the few markets that are down double digits calendar year to date, while most markets have been up, and I think the EU trade deal is a positive trigger. The budget, I hope, will be a positive trigger.
“The valuations are, and I believe— I hope—the earnings cycle that we are in… we are in quarterly earnings season right now, some companies have reported but many more are still to report. So, I hope those would be triggers, or at least the commentary that the companies give would hopefully give some kind of positive trend towards the next quarter and the year ahead. So, all of those could be positive triggers. Even the narrative that is out there is that India has lost the plot on innovation, on AI, and in Davos this year AI was the big theme and the Indian IT services were well representative, trying to really talk about what they are doing in AI, and I hope that will also reassure investors that India has not fallen so far behind on AI. So, I think that things are not looking as bad as the markets are showing.”
With FIIs cautious and the domestic market under pressure, investors and analysts are pinning hopes on upcoming policy announcements and corporate earnings to spark a renewed inflow of capital. The combination of the Union Budget, EU trade developments, and quarterly earnings could shape the market narrative for the months ahead.
