Foreign investors moving out of China due to a weaker-than-expected reopening are coming to India as they realise the slowdown here is only temporary, according to Rahul Chadha, chief investment officer at Mirae Asset Global Investment.
"It's going to be probably tough for a couple of quarters, but then the structural road drivers are intact. From an emerging market perspective, India stands out as a good structural story," Chadha said.
Despite the potential, the country's fairly expensive valuations compared to the rest of the world work against India, he warned.
"Overall, from the EMs, I think U.S. rates at 4–4.5% are a significant negative. Real acceleration for the EM story comes when the Fed starts cutting rates sometime next year," Chadha said.
India Inc.'s March Quarter Performance
Indian corporates had a heartening March quarter for the most part, according to Chadha.
"Financials stood out in terms of strong advance growth, record NIMs ... and consequently, strong net income growth. What also helped the sector was low provisions, as a result of which one saw record profits," he said.
Industrials posted a robust orderbook and strong momentum, Chadha said. "Construction companies came up with a good set of numbers, strong growth in orderbooks."
"Where things were a bit slow and disappointing was what happened on the consumer front, where the recovery is still slow. There's a bit of a softness in the space," Chadha said. "One saw a weak set of numbers from the IT services companies."
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