The FII (foreign institutional investor) sell-off is driven by the aggressive reopening of Chinese markets after a huge lockdown that led to a steep correction, said Nirmal Jain, Founder and Chairman, IIFL, in an exclusive interview with Money control.
He added that money was flowing from India to China as foreign portfolio investors (FPI) rebalanced their emerging market (EM) portfolio in favour of much cheaper Chinese stocks.
For Indian equity markets, 2023 hasn’t started on a positive note. FIIs have sold equities worth almost $2 billion in the first 13 sessions of the year — probably the worst FII sell-off witnessed in January over the last two decades, per Bloomberg data.
Header: January witnesses the worst FII-sell off in two decades
Asked about the inauspicious start, Jain said that some correction in Indian equity was required as valuations were higher than long-term averages.
Jain expects the GDP to grow 7 percent on the back of investment flow, savings, and a good monsoon. He also expects a huge pick-up in private capex, and added that while this would hinge on demand and capacity utilisation, the government also needs to incentivise industry and ensure that a conducive environment is in place, in order to catalyse private capex.
"The metal and commodity sector is expected to positive surprise investors and aid corporate to achieve earnings growth of 15-16 percent in 2023. China’s re-opening augurs well for the sector as it will fuel the demand for metals," he said. Jain added that this number is due to the lower base effect, given that the growth rate was lower over the last four to five years.
Explaining this further, Jain said that if the corporate topline grows 13-14 percent — in line with nominal economic growth — just a little margin improvement could lead to earnings growth of 15-16 percent.
Jain said that demand revival and inflation were the key reasons for the growth and cost efficiency techniques employed by corporates.
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