Indian market to benefit from foreign inflows, stay stock-specific

Investors should ideally be focused on the macro fundamentals and expected earnings growth Yogesh Patil, CIO, equity at LIC Mutual Fund

- Ram Sahgal

India will be one of the key beneficiaries of foreign investor flows, with an anticipated slowdown in the US amid escalating trade tensions, according to Yogesh Patil, chief investment officer (CIO), equity at LIC Mutual Fund Asset Management Ltd. A sustained low inflation and supply of domestic risk capital are likely to serve as tailwinds for India's equity markets even as earnings growth is expected to get a boost from a favorable base effect in the latter part of the fiscal, said Patil.

Investors are better off following a stock-specific approach, he said. Edited excerpts: The abatement of Indo-Pak tensions, trade deals between the US and its trading partners and rate cuts here have led to some recovery from the low of 7 April. Is the worst behind the markets? How are our markets looking from here, and your take on returns compared with the past five years?

Most of these known factors are already discounted in the market prices. While investing in equities, investors are always exposed to a few unknown risks. Hence, investors should ideally be focused on the macro fundamentals and expected earnings growth.

It is amply clear that the US is open to negotiating trade deals. At home, we have a growing economy, stable macros, improving terms of trade, improving primary deficit, relatively stable currency and low inflation. A structural rise in discretionary consumption may further aid economic growth.

A sustained low inflation and supply of domestic risk capital are likely to serve as tailwinds for the equity markets. Earnings growth may drive the stock prices. Investors should expect a stock-specific market, going forward.

Investments in diversified equity mutual funds with a five-year timeframe may generate healthy risk-adjusted returns.