FPI investments: Nov FPI investment may equal aggregate inflows of last 2 years: Nilesh Shah, Kotak AMC

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NEW DELHI: Market vateran Nilesh Shah says foreign inflows in November might exceed the total inflows that domestic equities market had witnessed in the previous two calendar years.

Calendar 2019 witnessed total inflows of Rs 1,01,122 crore while Calendar 2018 saw FPI outflows of Rs 33,014 crore. Net inflows for last two years stood at Rs 68,108 crore. This month, FPIs have already infused Rs 48,278 crore so far.

“There are 4-5 days left in the month. My feeling is FPIs will invest more money this month than it did last year. Since the market had negative foreign flows a year ago, effectively we would see two years of inflows in just one month,” said Shah, Managing Director at Kotak Mahindra Asset Management.

When money comes like this, prices get supported, Shah said, adding that FPIs will continue to remain bullish on India amid MSCI and FTSE index recasts.

Speaking at a webinar, India Investor Show- 2020, Shah said FPI investments in November jumped significantly since PM Narendra Modi’s meeting with foreign investors on November 5, making him believe the rally in the indices is here to sustain.

Shah said retail investors are having the last laugh after they bought into the market at March loss, while high networth individuals (HNIs) chose to book profits after the recent rise.

Shah said mutual funds have been net sellers of equities in last 3-4 months, not due to their negative view on the market, but the fact that some of the investors such as EPFO and HNIs have redeemed, which in turn has pushed fund managers to sell.

On earnings, Shah said September quarter results were amazingly ahead of estimates with Nifty recording its highest ever profit of Rs 1.07 lakh crore, up 17 per cent on a year-on-year basis; that too when sales were down 7 per cent for the quarter.

For such a thing, you need to expand your margins. “Earnings have come in due to tight cost control, productivity enhancement and the organised sector grabbing market from the unorganised sector. If such a performance continues, Nifty’s forward earnings would move to 23 or 24 times from 30 times at present,” Shah said.

He said the market is discounting huge inflows from retail and foreign investors, and is hoping that HNIs will eventually jump in. It is discounting that India will not be hit by a second wave of virus as hard as the US and European economies.

Shah said some of the companies would benefit while some otherz will suffer in Covid era.

He gave the example of early 1990’s liberalisation, where old textile mill owners used to say if their businesses are shut down, the whole country would go down the drain.

The mood, he said, was quite different when the same question was asked to business managers in IT, pharma or telecom companies. “Those new industry managers,” he said, “used to say that we would see a ‘new India’ and they really talked about tremendous opportunities ahead.”

“In reality, they both were right. Inefficient companies do die. There were many Sensex companies of the early 1990s that have even ceased to exist today. But IT companies creared tremendous wealth for investors,” he said.

Economic data talks about the past, but the market talks about the future, Shah said, as he tried to explain why the stock market is at record high levels even as the quarterly GDP has shrunk to historic lows.

Nifty50 hit a record high of 13,070 earlier in the day. Latest GDP data suggests the economy contracted 23.9 per cent in the June quarter.

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