India still one of the better long term growth stories: Maarten-Jan Bakkum, NN Investment Partners

Maarten-Jan Bakkum, senior emerging markets strategist at NN Investment Partners, believes that India remains one of the better medium-to-long-term growth stories in emerging markets, which should mean that higher valuations are sustainable.

Excerpts from an e-mail interview:


Why have foreign investors been going slow on flows into India?

We are currently in an environment where risk appetite to EM overall is strong. This typically means that foreign investors prefer high-beta markets over longer-term growth markets such as India. This could explain why foreign flows to India have been a bit soft recently.

What are the key factors worrying FPIs with regards to Indian markets - is it the impending Fed balance sheet unwinding or valuations or restrictions on participatory notes or any other factor (domestic or international)?

The main foreign worries over the Indian market are the relatively high valuation levels, the still mediocre corporate investment growth and, linked to this, the balance-sheet problems in the state-owned banks.

Are foreign investor flows into Indian equities likely to slow further?

No, not necessarily. In this good EM environment (with less worries about Fed and ECB policy normalisation, good global trade growth and benign data from China), India will also get its fair share of flows. Besides, India remains one of the better medium-to-long-term growth stories in EM, which should mean that higher valuations vis-à-vis GEMS are sustainable.

Do you see a sharp correction in Indian markets in the near to medium term? If so by how much?

No, I do not expect that.