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<\/p>\nIndia must clear three hurdles before foreign investors return in a meaningful way: a thaw in US\u2013India relations, a revival in earnings growth, and the next wave of policy reforms, according to Rajiv Batra, Head of Asia and Co-Head of Global Emerging Markets Equity Strategy at JPMorgan.<\/p>\n
Speaking on the sidelines of JPMorgan\u2019s 10th India Conference in Mumbai, Batra said these are the top concerns he hears from global investors. \u201cThe number one question is, when we expect a thaw happening in US and India relationship? The second one is, when we can expect the double-digit growth handle\u2026 And last but not the least, when do we expect foreign investors to come back to India after last four years of exodus?\u201d he said.<\/p>\n
Foreign portfolio investors have pulled money out of India in four consecutive years, even as other emerging markets have staged a comeback. Batra noted that India has suffered \u201cthe worst ever underperformance since 1990 of close to 25\u201330%,\u201d while peers such as Korea, Taiwan and China have rallied on domestic inflows.
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\nHe argued that US-India relations could be the catalyst for a re-rating of Indian equities. \u201cMaybe by reducing tariff by 25%\u2026 thawing of relationship is the catalyst number one, which can let the risk premia in India to get lower, and India\u2019s PE re-rating can happen in line,\u201d he said, adding that this would allow India to enjoy the valuation gains seen in other emerging markets.<\/p>\n
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Earnings growth is the second big hurdle. India\u2019s trailing 12-month earnings growth has been stuck at about 4.5\u20135%, while valuations remain elevated near 22 times price-to-earnings. Investors want double-digit earnings to return, he said.<\/p>\n
\nThe third factor is reforms. After monetary easing, corporate tax cuts, and the GST overhaul, Batra said markets are now \u201cwaiting for the fourth arrow\u201d in the form of deregulation and easier foreign direct and portfolio investment rules. Combined with GST 2.0, he expects consumption rather than capex to remain India\u2019s dominant growth driver for the next four to five years, with autos, jewellery, and other discretionary categories benefiting.<\/p>\n
Batra believes emerging market (EM) equities could deliver another 20\u201325% upside in the next 12 months. \u201cA 1% dollar depreciation leads to 4.50% increase in EM equity performance. This year, dollar has gone down 12%… which means there is still performance pending,\u201d he explained.<\/p>\n
JPMorgan expects the US Dollar Index (DXY) to drop to 95 by end-2025 and 92 by mid-2026.<\/p>\n
\u201cWe are entering into synchronised easing cycle\u2026 which means we are just at the start. I will not be surprised, the regional index is going to trade at even at 20 PE,\u201d he said.<\/p>\n
Read Here |\u00a0EXCLUSIVE | India should remain America\u2019s best friend despite non-alignment, says JPMorgan CEO Jamie Dimon<\/a><\/p>\n