Earnings trigger needed for greater FPI interest in India, says CLSA

India is not as much of an overweight market today for investors as it used to be one to two years ago, said CLSA's India Strategist Mahesh Nandurkar in a note.

Nandurkar said this was observed in meetings with investors at the firm's recent investors forum.

Nandurkar said that weak earnings and high valuations are the two main issues that foreign investors are facing and that incremental interest from FPIs is unlikely to materialize unless earnings recover.

Continued strong domestic flows have helped markets perform and sustain valuations, which will continue to remain the trend, said CLSA.

The Hong Kong-headquartered brokerage said that base effect will start aiding earnings growth from the December quarter and to some extent, in the September quarter as well.

CLSA remains optimistic that housing-led capex recovery is around the corner. The brokerage's top picks are ICICI Bank, IndusInd Bank, State Bank of India, housing finance companies, metals, L&T, Ambuja and select property companies such as Sobha and Godrej Properties.