Investors across the world are waiting to buy Indian equities, but are waiting for a further correction as the country remains a favourite long-term equity market in Asia, foreign brokerage firm CLSA Asia-Pacific Markets has said.
CLSA strategist Christopher Wood said Asian stock indices are not expected to perform as badly as the US indices this year, as these economies dependent a lot on domestic demand which helped come out of the financial turmoil faster, while the U.S. is still in a downturn.
“One of the economies which has displayed that resilience is India...Investors want to buy more in Indian shares but are expecting and hoping for more of a pullback,” Mr. Wood wrote in his Greed & Fear report, as most of the shares are still commanding a hefty premium even now.
It can be noted that the benchmark BSE Sensex gave a whopping 81 per cent return last year. The market barometer Sensex has dropped nearly 10 per cent this year after an initial rally early January, and about 12 per cent off its 2009 high in mid-October lat year following rising food inflation and the recurring crises in the global markets.
“India remains a favourite long-term equity market in Asia with the economy’s unique domestic demand focus. It also remains complementary to China in an Asian equity portfolio, because the two investment stories are, in almost every aspect, so completely different from each other,” Mr. Wood said.
Last year CLSA predicted that within the next few years the importance of foreign investors in Indian market would be reduced as local players would come into play.
“That does not mean that foreigners will not want to buy Indian equities, as the big pick-up in foreign buying of Indian equities this year after the election makes clear,” Mr. Wood of CLSA said.
“This foreign demand, growing domestic investor demand and the relatively limited free float of Indian stocks all means that India is likely to continue to trade at a valuation premium to Asia and world equity markets,” he added.
The brokerage has also rated India’s oldest and biggest mortgage lender Housing Development Finance Corporation (HDFC) as the best buy among the stocks in the emerging markets.
“If infrastructure is the current hot area, if Greed & Fear is to own only one stock in India or indeed in Asia it would be HDFC,” Mr. Wood said.