Expect more outflows from Indian markets in near future: Anindya Chatterjee, IIFL – Economic Times

Posted on February 16, 2011 by


Anindya Chatterjee, President, IIFL Inc , talks to ET Now from IIFL’s Enterprising India Conference 2011 on a macro perspective of how Indian markets are poised as an investment destination, post-correction.

After the recent correction, what do you make of Indian markets and are Indian markets now looking attractive again?

Anindya Chatterjee : India received more that $54 billion of portfolio inflows in the last two years and we have just about seen $1.5 billion of outflows. So it is very hard to take a call on short term inflows and outflows, but the perspective is that there is a switch happening and it is probably all not done. So there would be more outflows. We should expect more outflows from the Indian markets.

In terms of valuations, the Nifty or the Sensex trading at close to 15 times 2012 March earnings is not incredibly cheap from a historical perspective as well. During times of pessimism, they can go down below the long term averages and so this further downside on the market from that perspective.

Could you quantify the correction and the fund outflow that are expecting in the Indian markets from these levels?

Anindya Chatterjee : I would not be able to quantify the outflow possibility, but we know how much of inflows happened and if about 10-15% of those investors sit on the fence and try to pull out, we can take a ballpark figure. So that will be a large number, but as market corrects, those who are sitting on the fence might start seeing value and actually what we predict today as market corrects may change quite rapidly.

In terms of the market, we do not take a call on the level of the Sensex or the Nifty, but there is further downside possibility of easily another 5% to 7% from these levels for people to really see value emerging in the Indian market. Now having said that, this is the frontline index. There are several midcap companies and the midcap companies have corrected much more from the recent peaks.

So there, the valuation increasingly would look attractive as the frontline index also corrects and in terms of actual level of the midcap index correcting, it might not have that much of downside.

You mentioned that selectively Indian markets are looking attractive. So tick mark some names or sectors for us where valuations are looking attractive.

Anindya Chatterjee: We should focus on the macro story of India which is independent in some respect from the global uncertainties at all point of time. So domestic consumption story still remains a long-term sustainable theme. There are several companies that are very domestic focused, did see pressure on margins because the raw material prices and also wages etc., their value would be emerging faster because of India’s greater visibility of earnings and front line and the headline numbers for those companies.

So I would look at consumption at a point when the politics and the policy fall in place. We have a lot of stalled projects from mining to construction to highways etc. and the construction companies order books lag relative to market expectations etc. and they corrected a lot. So I would look at construction, EPC companies and capital goods sector at the point when the market corrects because that is where they would see a lot of upside going forward if you take a 2-year view.

Posted in: India