Are US investors turning negative on India?

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26 Aug, 2025 12:21

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Moneycontrol Bureau

The haze of 'achhe din' is clearly ebbing and reality is slowly but surely creeping in. From May 1, 2014, to August 31, 2014, Sensex and Nifty climbed nearly 19 percent, but in the past month since May 1 this year, Nifty has slipped 2 percent and Sensex 1.6 percent.

From being extremely bullish on India 12 months ago, investors across the US have now become negative at the margin on India, says Macquarie in a research report. It could well be a function of China doing very well, but one cannot simply turn a blind eye to the poor earnings show.

However, foreign investors haven't completely given up on India and are not yet ready to sell-off their positions, indicating that if reforms such as GST, land acquisition, labour reforms, PSU banks capitalisation, bankruptcy laws, etc., don’t progress as per expectations, there is more downside for the markets, the report further adds.

Earnings and China's upmove aside, recent hawkish comments by Reserve Bank governor Raghuram Rajan too spooked foreign investors, coupled with other global factors such as the eventual inclusion of China-A shares in the MSCI Index and possible hike in interest rates by the Federal Reserve. Weak monsoon forecast too cast a dark spell on Indian markets, the report adds.

Another frequent and troubling point of discussion was the recent Economist article on Prime Minister Narendra Modi, titled “India’s one-man band”.

Continuing woes of PSU Banks:

Despite myriad promises from the government, there has been little progress on public sector banks' recapitalisation, "which clients concurred saying it is quite inexplicable that the government hasn’t taken this issue seriously,'' the report states. Macquarie says some clients even argued that merely replacing the CEOs of PSU banks and hiring a private sector individual wouldn’t solve the problem, as the new CEO would have to deal with a workforce whose average age is 50+ years, there are strong trade unions and the ability to bring about sweeping changes is limited. Many even argued that capital is now required to grow out of the problems and without capital infusion, things could get very worse for the banking system and could impede overall economic recovery.

Stocks in focus:

One of the most discussed stocks was Indiabulls Housing Finance. Among other NBFCs, SHTF and Bajaj Finance, did find some interest among US investors. Investors have also warmed up to YES Bank and ICICI Bank was preferred over Axis Bank due to the recent sharp correction in ICICI Bank resulting in the stock now trading at a 25 percent discount to Axis.

Written for the web by Devika Ghosh