By Divya Chowdhury
MUMBAI (Reuters) – Indian markets offer an attractive medium-to-long term investment opportunity, despite a recent exodus of foreign money, fund managers told Reuters on the sidelines of last week’s World Economic Forum’s annual meeting in Davos.
India’s economic growth prospects, a large consumer-oriented population, limited exposure risk to U.S. President Donald Trump’s threatened tariffs and continued de-risking from China make it an attractive choice among emerging markets, they said.
“India is not necessarily always the cheapest market, (but) I think that having India as part of your emerging markets portfolio makes a lot of sense,” Saira Malik, chief investment officer at Chicago-based Nuveen, which manages assets worth $1.3 trillion, told the Reuters Global Markets Forum.
Foreign portfolio investors have withdrawn more than $31 billion from Indian equity markets since October, provisional exchange data shows. January 2025 has seen outflows of around $8 billion, on concerns over slowing growth and falling corporate profits, even as domestic funds continue to provide support.
“When you have 6%-7% growth in real terms and 10%-12% nominal growth, you can support an investment thesis that can deliver in high-teens growth, despite the fact that you’re actually paying full value going in,” said Rishi Kapoor, vice chairman and CIO at Investcorp, the Middle East’s biggest alternative investment firm.
A weaker manufacturing sector and slower corporate investments are seen reducing India’s growth rate to 6.4% in 2024/25, its slowest pace in four years.
Kapoor said Investcorp, with assets under management of $55 billion, has widened its India focus from consumer-oriented companies to healthcare, financial services, manufacturing and IT services.
The benchmark NSE Nifty index is down nearly 12% from a record high in September 2024, while the Indian rupee continues to hover around the all-time low it touched earlier this month against the U.S. dollar.
Nevertheless, Malaysian sovereign wealth fund Khazanah’s managing director, Amirul Feisal Wan Zahir, said he felt “confident and bullish” about India.
“It’s been very good for us in terms of returns, the public markets, and even the private market as well, especially for innovation,” Amirul Feisal said.
India is set to announce its budget on Feb. 1, followed by the central bank’s monetary policy decision, the first under its new governor, Sanjay Malhotra, on Feb. 7.
Economists in a Reuters poll forecast New Delhi will stick to the fiscal deficit target of 4.5% of gross domestic product, with gross borrowing forecast at 14.28 trillion rupees.
Meanwhile, Indian bond yields have eased over last few days on bets that the Reserve Bank of India will cut rates to help a sagging economy, after it announced liquidity measures earlier this week, with investors expecting the bond rally to continue.
“India is the new China,” said Jennifer Grancio, global head of distribution at Los Angeles-based asset manager TCW Group, which manages assets of nearly $200 billion.
“You’re going to see a lot of new capital flows and foreign investments that I think is going to continue to propel the market there,” Grancio said.
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(Reporting by Divya Chowdhury in Davos, Bharath Rajeswaran, Bansari Kamdar and Mehnaz Yasmin in Bengaluru; Editing by Alexander Smith)
