HITTING NEW HIGHS
Analysts attribute the volatility in part to foreign outflows, with capital shifting from Indian equities into US treasury bonds and other emerging markets like China and Indonesia.
They told CNA that the road ahead may remain uneven.
This comes as trade tensions over US tariffs and turmoil in the Middle East pose risks to India’s growth.
Still, India’s massive consumer market, recent infrastructure investments and the manufacturing sector’s pivot away from China are encouraging factors.
Equity analysts believe Indian stocks could hit new highs by the end of the year, even if short-term turbulence occurs, according to a recent Reuters poll.
This means foreign institutional investors, who hold only about 17 per cent of Indian equities as of March this year, may once again view the nation as an attractive destination.
“(Foreign institutional investors) are of course not going to just see these smaller parts of volatility,” said Tanvi Kanchan, head of strategy at Anand Rathi Shares and Stock Brokers.
“They’re going to see how your India growth story is, which is contributed not only by earnings, but also broadly in terms of what exactly are the main drivers that the Indian markets are going to have.”
A key driver could be more rate cuts by India’s central bank. It has already reduced lending rates by half a per cent this year and could lower them further.
Observers said the hope is that this could spur more spending, and in turn attract both foreign and domestic investors back to the table.
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