Strong growth outlook to attract foreign investments to India

The strong economic growth outlook of India built on efficient fiscal and monetary management and a progressive reform agenda is expected to attract both foreign direct investment (FDI) and foreign portfolio investments (FPI) starting this year, Vikas Gautam, CEO, Aditya Birla Sun Life Asset Management Company Pte. Ltd told Gulf News in a recent interview. “The government has been able to build a strong foundation for change which is quiet visible on the ground. Though a lot of reforms the government had envisaged have not gone through till now, but at the same time the foundation has been laid, and the result of that foundation will be visible in the next 12 to 18 months,” said Gautam. In its latest report, ‘Global Economic Prospects’, The World Bank has projected that India would remain comfortably the fastest growing large economy in 2016, at a rate more than a percentage point higher than China. The World Bank has projected the Indian economy to grow at 7.8 per cent in 2016 and China’s to grow at a more modest 6.7 per cent while the world economy as a whole would grow at 2.9 per cent. Though the rupee depreciated last year compared to 2014, it largely managed to hold its ground compared to most other emerging market currencies. It is unlikely the rupee will face a massive depreciation as happened in 2013 when it slipped in excess of 20 per cent. Over the last two years, the RBI has been successful in curbing extreme speculative volatility out of the market. “FDI and foreign portfolio allocations are expected to increase this year. There has been a lot of positive impact following the improved ratings as well as a number of countries from around the world are signing bilateral agreements with India to support infrastructure developments. Once infrastructure developments start, the ripple effects of that will get reflected on the capital markets for the simple reason the execution of infrastructure projects is going to be done by local companies,” said Gautam. Unlike other emerging markets, the impact of future US interest rate hikes on capital flows out of India will be muted. The US is hiking rates because the economy is recovering. Historical data for the two decades show good growth in the US has meant strong growth prospects for India. While future rate hikes are expected to have some immediate ripple effects, it is not likely to result in capital flight from India. On the contrary strong macroeconomic fundamentals are likely to attract more investors to India. India is one of the few emerging markets where some of the largest pension funds either have allocated in the range of $5 billion (Dh18.36 billion) to $10 billion over the past 12 months. “Looking from their perspective yields are negative or zero in most developed markets. They have to match liabilities for 30 to 40 years and there aren’t many markets that can give these funds yields in the range of 7 to 10 per cent for such longer period,” said Gautam. In the past, India was part of tactical allocations for most institutional investors, but now it is increasingly becoming part of their core allocation strategies. Box: Middle East investments to surge Dubai: India is expected to receive strong flow of investments from the Middle East as institutional investors, private offices and sovereign investors compare opportunities with other emerging markets said Vikas Gautam, CEO, Aditya Birla Sun Life Asset Management Company (ABSLAMC). ABSLAMC has a 100 per cent wholly-owned subsidiary in Dubai called ABSLAMC Dubai that is regulated by the Dubai Financial Services Authority (DFSA). ABSLAMC Dubai services clients across the Middle East through its Dubai office. “We have a very strong investor base in the Middle East, especially in the GCC. Investors are aware of the opportunities and we intend to offer products and services that suit the requirements of regional investors,” Gautam said. The company offers investment options on both public markets including equities, fixed income and opportunities in alternate space too. Keeping up with the growing demand for exposure to India investments from investors in the Middle East, Asia and Canada, the company is planning to launch a couple of new funds. First will be a fund focused on Middle East and Asia investors, a 100 per cent India dedicated high growth fund that will focus on small and mid-cap sectors. Additionally the company is also launching this month an open-ended balance fund for Canadian investors with 60:40 equity bond composition. With the growing FDI inflow and infrastructure investments, the Indian corporate sector is expected to benefit in terms of earnings. “As a consequence of this, corporate earnings will get rerated in India which will reflect on valuations on the capital markets,” said Gautam. Source- gulfnews.com For further assistance related to Investment based queries in Dubai &India, please visit: http://www.pursueasiaconnexio.com