A security guard stands at the entrance to the atrium of the National Stock Exchange (NSE) in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Julius Baer’s Faith In Indian Stocks Unshaken Despite High Foreign Fund Outflow

Julius Baer, Switzerland’s third-largest wealth manager, remains bullish on Indian equity markets even as foreign investors continue to pull out funds, citing its strong domestic economy keeping it relatively insulated from global concerns.

While crude oil prices coming off their May highs is positive for India, the rise in the U.S. dollar is keeping foreign investors way, according to Mark Matthews, head-research Asia, Bank Julius Baer & Co.

India is insulated because its a strong domestic economy...Just add up the pros and cons within India and on balance, the pros outweigh the cons. So, I haven’t turned bearish on this market; I am still overweight. It’s still a good market to me.
Mark Matthews, head-research Asia, Bank Julius Baer & Co.

Foreign funds have sold Rs 41,000 crore so far this year, the most since 2009. However, stock indices managed to shrug off headwinds such as rising oil prices and a weak rupee thanks to local funds pumping in more than Rs 60,000 crore year-to-date.

Foreign investors are watching the political situation in India closely, said Matthews. He said there is a possibility of upcoming state elections in Rajasthan and Madhya Pradesh not going in favour of the ruling BJP.

Here are the other key points from the conversation:

  • Trade war should not cost much of a dent in various economies.
  • Too early for foreign investors to take a U-turn from the Indian markets.
  • Foreign flows into India are unlikely to turn positive in the second half.
  • Countries are purposely starting to weaken their currencies to have a buffer against higher tariffs.
  • Microeconomics are looking very strong for India.
  • Bad loans for Indian banks have peaked and are starting to come down.
  • Weakening currency has significantly helped the IT sector.
  • Corporate profits in India will probably be 50 percent higher three years from now than it is today.

Watch the full interview here:

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