After a brief period of volatility, foreign equity inflows into India have picked up with foreign investors having brought in over $17 billion during the calendar year so far. Kalpana Morparia, CEO, JP Morgan India, in a conversation with Ira Dugal, says that foreign investors continue to look at India in a bottom-up way and adds that a turnaround in the economy will be an additional pull factor for investors.
How are foreign investors looking at India currently? Has the pessimism died down?
When you look at investors, the view is not “I am investing in the broad macro of India.” Because India has very diversified sectors within the corporate world, investors are looking at it in a far more bottom-up way—how are different sectors doing, what are companies within those sectors doing. And that's driving a lot of the investor decisions in terms of what they invest in. You will see some passive flows which are taking a view on the broader market but India has a fair share of the long-only funds who have been investing in India for the last 20 years. And that is really a bottom-up analysis of sectors, companies and managements. So, despite the trending down of topline growth and net revenue growth over the past several quarters, Indian markets have shown an enormous amount of resilience. We have to remind ourselves that Nifty is at above-6000 and Sensex is a little over 20,000. So, we are not a “one sentiment” play unlike countries that are driven by single investment theses.
As far as the market is concerned, do you agree that the Indian market doesn't deserve the kind of multiples that it has traded at in the past because of the weaker growth environment?
Market multiples are now near 15. Even if you look at a 5% rate of real GDP growth and build inflation to calculate the nominal GDP growth, I see no reason to believe that these multiples are not justified. And this is the bottom. You are already seeing signs of an underlying momentum picking up. You have recent announcements in sectors such as roads. All of that is going to be an additional pull factor.
So you don't think we are hostage to global liquidity conditions?
A turn in liquidity can impact the markets temporarily. So, some of the passive funds which are just taking a passive view may get impacted. But, I