Moneycontrol Pro Panorama | Why is India burning less bright for foreign investors?

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

Foreign broking houses are not feeling the love for Indian equities as strongly as they did till just some months ago. This may have prompted some investors to put on their worrying hats, open their worksheets to reassess their assumptions and look closely for blind spots. While these are sell-side brokers changing their views, FII data are not showing investors throwing in the towel. But why are they turning cautious even as domestic investors are queuing up for more helpings of equities?

It’s all relative, we write in today’s edition, as foreign investors evaluate the price-value equation in multiple countries to decide how to advise their investors. China’s dimming outlook seems to have brought its valuations to a level that makes it worth a relook according to some. But, if India is your main or only market where you invest, do you still need to worry? Even if domestic investors have the heft to offset a deceleration in foreign flows, are there any other factors to worry about? Do read to find out.

Speaking of China, the World Steel Association said the country’s steel output fell by a massive 21 percent in September over a year ago, as coal shortages, rising power costs and the earlier efforts to limit pollution have combined to hit steel output. Several steel plants have cut output in response to these events. That’s a massive dislocation of output for the global steel industry as China produces nearly half of the wold’s steel output and consumes in equal measure too.

This raises several questions. If China’s output has fallen by a fifth, who is picking up the slack? Can China’s loss be India’s gain? Why are steel prices falling if steel output is declining, a reduction in supply should result in prices going up, right? Do read our take to find out.

Finance is the lifeblood of the economy they say, so it’s not surprising that bank stocks have come back in favour in 2021 as the economy recovered. But PSU bank stocks have gone ahead of their supposedly savvier private counterparts in the past 12 months. Why, we ask in today’s edition and list a few reasons ranging from the recovery driving expectations to better asset quality to stronger capital backing, but we also caution on the risks that linger on for these stocks.

Among private financial stocks, our research team has written on the results of Bajaj Finance — which turned in a healthy performance and is attempting to add a digital edge to valuations, Kotak Mahindra Bank — expensive but finally turning its attention to growth and Axis Bank — a growth laggard but whose valuation discount is expected to narrow.

More investing insights from our research team

Ambuja Cements Q3 CY21: Rock solid performance

Cipla: Focus shifts to FY23 launches

SRF: Inflation can impact capex payback periodWhat else are we reading today?

The pros and cons of RBI’s massive build-up of forex reserves

Start-up Street: Getting the right investors for your start-up

Facebook after the whistleblower: Can Zuckerberg reboot the social network? (republished from the FT)

Technical Picks: DLF, IDFC First Bank, Balkrishna Industries and Tata Chemicals (These are published every trading day before markets open)

Ravi Ananthanarayanan
Moneycontrol Pro