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India Poised for FPI Inflow Surge as EM Rally Begins
18 Jan
Summary
- India's stock valuation premium over emerging markets has reduced to 50-60%.
- Nifty earnings growth is projected to be around 15% next year.
- Crude oil prices are stable, with geopolitical risks being closely watched.
India stands at a crucial juncture, poised to attract substantial foreign institutional investor (FPI) inflows as emerging markets gain traction amid global macro uncertainties. The nation's stock valuation premium has notably decreased from 80-90% to 50-60% of other emerging markets, aligning closer to historical averages and enhancing its appeal.
Projections indicate a strong performance for Nifty earnings, with an estimated growth of 15% for the upcoming year. This optimism is supported by recovery in banking and financial services, alongside significant growth anticipated in energy, metals, and mining sectors. While demand revival's full impact on earnings might be seen by fiscal 2027, initial GST cut benefits are already evident in insurance and auto sectors.
Crude oil prices currently show no signs of a significant surge driven by demand-supply dynamics, though geopolitical developments warrant attention. Energy stocks in India are viewed as a portfolio hedge. Companies supplying the oil and gas industry, particularly in exploration and EPC sectors serving the Middle East, are positioned to benefit from higher order flows and improved payments.
