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HSBC cuts India to ‘underweight’
The report tells investors to go underweight on India citing concerns such as weak earnings growth expectations
Mumbai: India is among the most over-owned markets in Asia at a time when earnings growth is slowing and room for rate cuts is limited, said HSBC Global Research in its latest India strategy report. Citing these concerns, HSBC has cut India’s ratings to underweight from overweight.
The change in rating comes when the Indian markets have been underperforming. The benchmark BSE Sensex is the worst performing major market in Asia. Year-to-date, the Sensex is down 2%, while the Chinese benchmark index is up 34%. This under-performance has pushed capital towards markets like China among others.
“Last year, Prime Minister Narendra Modi’s victory set the stage for a significant amount of reform optimism and encouraged portfolio inflows. Indian equities rallied and with lack of momentum in other markets, both global and regional mutual funds built historically high overweight positions in this market by the end of 2014. This continues to be the case,” said HSBC in its report.
The report tells investors to go underweight on India citing concerns such as weak earnings growth expectations, limited scope for further rate cuts and the negative impact of El Nino.
To be sure, not all foreign investors are negative on India. Asia-focused brokerage house CLSA had in its 30 April report increased its weightage on Indian stocks by a percentage point after a recent correction made the Indian stocks more attractive. CLSA acknowledged that foreign investors were currently looking for reasons to sell India.
“It is no surprise to find investors looking for reasons to sell India and the evidence is there in terms of a continuing lack of evidence of a pickup in the investment cycle. There is also the issue of the slowdown in the rural economy,” CLSA said.
The foreign institutional investors (FIIs) have sold $2.34 billion in equity markets in the last 15 out of 16 sessions, except on 21 April and 11 May when FIIs bought $2.6 billion and $49.07 million, respectively. In May so far, FII sold $980.94 million in debt and $557.29 million in equity.
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First Published:13 May 2015, 12:42 PM IST
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