In an interview with ET Now, Sunil Singhania, Head Equities, Reliance Mutual Fund , talks about the magnitude of selling currently being witnessed in the Indian market as well as their current portfolio strategy.
Are you surprised with the magnitude of selling we have seen in the Indian equities until now? There has hardly been any selling. $1 billion in selling by foreign investors on the portfolio of $300 billion would be roughly 0.3%. Although selling looks to be a bit large in absolute figures, I am not surprised. Also, it is not an India-centric issue. The selling is mostly out of ETFs seeing redemption, and these are emerging market ETFs — not necessarily India-centric ETFs. So, it is more a short-term view which global investors are taking and they want more money towards developed markets to emerging markets which, according to us, would reverse sooner than later.
What if institutional selling intensifies? The Indian markets are narrow and shallow. Can they absorb $2-$3 billion of outflows? If the selling picks up more, it would be the biggest opportunity for Indian investors for a long time. If you go back in history in 2003, 2006 and 2008, when foreigners sold lots, it was the best time to buy stocks. History has shown that these aberrations ultimately turn out to be the best buying opportunities. The only one caveat is that investors should believe like we do that India’s structural growth story is intact and in 10 years’ time, it would be a $5-trillion economy. If that view is there, these aberrations would be the best time to buy.
There are a lot of headwinds: inflation , high commodity prices, policy paralysis, etc. What is bothering the markets? It is a combination of a lot of these factors, but from a foreign perspective, it is more a switch out of emerging markets in the near term. In fact, there was a good report today which said that the overweigh to emerging market has fallen to 5%, which is the lowest in the past 5-6 years. That clearly demonstrates that this technical trade is about to end. In terms of the fundamental parameters, probably the markets are discounting the worst negative in almost all of them. So, whether it is inflation, liquidity crunching or decision making coming to a stand still from a government perspective, we are discounting the worst negative in almost all of these and from here on, incrementally in each of these things we would see small positives coming on a daily basis.