After rising sharply from their March 2020 low, the valuation of the Indian stock market has become a concern, HSBC said at its Asian outlook conference for the second half of 2021. It maintains a “neutral” rating on Indian stocks, but expects foreign direct investment (FDI) to accelerate as the economic recovery accelerates.

“FDI in India should pick up thanks to a strong rebound in growth. Any decline in FDI, I think, will only be temporary. The government’s latest stimulus measures announced on Monday are marginally positive. However, compared to the economic dislocation observed in India, the package is not very large. Given the pace of vaccination, India is expected to achieve herd immunity in the first half of 2022, ”said Frederic Neumann, Co-Head of Asian Economics Research at HSBC.

Most emerging markets (EM) enjoyed healthy flows for most of FY21 as global central banks, particularly the US Federal Reserve (Fed), remained “dovish” and pushed liquidity to help to revive economic growth. In this context, foreign portfolio investors (REITs) have invested in all geographies and asset classes. India also got its share with REITs investing a record 2.74 trillion rupees ($ 37 billion) in FY21 in Indian markets – the most since FY13, when had injected 1.4 trillion rupees ($ 25.8 billion), according to the data.

The S&P BSE Sensex and Nifty50 posted their best exercise performance in a decade and jumped 68% and 71%, respectively, in FY21. Earlier in FY10, the S&P BSE Sensex had jumped 80.5%, while the Nifty50 had gained 73.7%. Meanwhile, foreign holdings in the Indian stock market soared to 27.6%, well above the long-term average of 19.6%, according to a recent report from Nomura. FIIs have increased their stake in metals, cement, coal / utilities, consumer durables and industrial sectors in recent months, while reducing their position in the media and real estate sectors .

Indian markets, according to Herald van der Linde, head of Asia-Pacific equity strategy at HSBC, are seen as an alternative to China. “The flows to China usually come from India and vice versa. That said, the valuation of the Indian stock market now appears expensive. Last year, India received a good share of the flows from the regions of North Asia. In addition, the third wave of Covid still remains a risk for the country, ”he said.

HSBC has fixed India’s GDP growth for FY22 at 8% in FY2021-22 (FY22), with the first half likely to be weak, due to both costs direct and indirect of the second wave.

“But we remain positive about growth prospects in the second half of the year, when a critical mass of the population will be vaccinated. At the current rate of 6.5 million jabs per day, around 55% of the global population will likely be vaccinated by the end of 2021, ”wrote Pranjul Bhandari, chief economist for India at HSBC in a note co -written with Aayushi. Chaudhary.

Dear reader,

Business Standard has always strived to provide up-to-date information and commentary on developments that matter to you and have broader political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these difficult times resulting from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative views and cutting-edge commentary on relevant current issues.
However, we have a demand.

As we fight the economic impact of the pandemic, we need your support even more so that we can continue to provide you with more quality content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscriptions to our online content can only help us achieve the goals of providing you with even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital editor