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3
May 2018
 |
| India growth story (The Total Investment & Insurance Solutions) |
US
investment banker Morgan Stanley said on Thursday that lower return
expectations from the Indian stock market is due to persistent growth
disappointment of past few years, signalling low investor confidence in the
nation's growth story. The Total Investment
& Insurance Solutions
In
a research report, "Where has the India Story Vanished", the American
financial services multinational said that within the country's aggregate
investor base, this "erosion in confidence" was concentrated in
foreign portfolio investors (FPIs), who have reduced their India position in
the average emerging markets (EM) portfolio to a seven-year low. The Total Investment & Insurance Solutions
Using
"beta" as a measure of the volatility, or systematic risk, on returns
from the Indian market as compared to EMs, report authors Ridham Desai and
Sheela Rathi said India's beta in relation to EMs had fallen 37 per cent since
December 2014 "to a 13-year low". The Total Investment & Insurance Solutions
"Price
action (i.e., beta) suggests that the India idiosyncratic story is at its
weakest in history and India's returns are being driven largely by EM
factors," the report said. The Total
Investment & Insurance Solutions
"We
think the fall in relative volatility is down due to persistent growth
disappointment of the past few years. This probably means that investor
confidence in India's growth story is low.
"And
within the aggregate investor base, this erosion in confidence is concentrated
with foreign portfolio investors who have reduced their India position in the
average EM portfolio into a seven-year low -- explaining the fall in India's
relative volatility and beta versus EM," Desai and Rathi said.
"Earnings
have been in their deepest and longest earnings recession in history having
lasted in excess of seven years and resulting in a 20 per cent drawdown from
the top. The Total Investment & Insurance
Solutions
"If
we are right and the earnings cycle has troughed it may also mean that India
has likely become a counter cyclical market," they added.
In
a report published on Wednesday, Morgan Stanley said that Asia's emerging
market stock rally in late January may be dying down and earnings expectations
were overly bullish. The Total Investment
& Insurance Solutions
The
Morgan Stanley Capital International (MSCI) Emerging Market Asia Index has lost
nearly 10 per cent since reaching its record high on January 29.The Total Investment & Insurance Solutions
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