Mumbai: India’s stock markets are slowly showing signs of a fall in the face of mounting joblessness, rising inflation and the impending threat of the 50% tariff imposed by the Trump administration. In the eyes of fund managers across the world, the highly inflated valuations of the Nifty and Sensex are no longer a cause of cheer, but an opportunity to exit with their profits before they turn to losses.
According to a Bank of America (BoA) survey, almost 30% of global fund managers have expressed disappointment with India’s stock market, making it the least preferred amongst its Asian peers. Donald Trump’s unreasonable tariffs is just a part of the challenge.
In the previous survey by BoA in May, almost all the respondents considered India as the most favoured market, as public perceptions suggested India would likely have a favourable trade deal with the US based on the positive results of the trade negotiations.
This perception has now turned into concern as India and the US have failed to seal a trade deal, even as China, Vietnam and even Pakistan have managed to do so.
Almost 41% of the survey respondents are anticipating a weaker global economy, even as they remain bullish on innovation and technology-focused companies in China and Japan.
Although the US trade tariffs were primarily aimed at slowing trade with China, India lacks the leverage to negotiate a better deal, unlike China.
The 50% tariffs are proposed to come into effect from August 26, forcing domestic manufacturers to seek new markets.
But that’s not the primary concern. Most foreign fund managers are cashing in on the overvalued stocks, many of which are higher than 2 times the PEGrowth ratio. Most reputed companies, including Alphabet, Microsoft and Apple, have PE Growth ratios lower than 1.5 which remains an ideal benchmark.
On the other hand, this overvaluation has sparked a market frenzy in India, with Mutual Funds and other domestic institutional investors (DIIs) buying out the foreign investors’ stakes.
While market analysts have feared a dotcom bubble, many investors continue to pour money in Mutual Funds and stocks, enamoured by glossy historical returns and dividends that they believe will continue forever. How will this turn out? Well, that’s everyone’s guess.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers should conduct their own research or consult with a qualified financial advisor before making any investment decisions. Views are personal.
