Global Funds Load Up on Indian Stocks as Virus Shelter in Asia
A bronze bull statue stands at the entrance to the Bombay Stock Exchange (BSE) building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Global Funds Load Up on Indian Stocks as Virus Shelter in Asia

(Bloomberg) -- India’s $2.1 trillion stock market is drawing increasing foreign investment as the country remains relatively unscathed from the coronavirus outbreak threatening lives and economies around the world.

Fund management firms including Eastspring Investments and Northcape Capital are flagging the defensive qualities of India’s domestic-focused market amid softening energy prices and signs of an economic recovery.

More than 80,000 people have been infected and over 2,700 have died, with cases expanding beyond the China epicenter through much of Asia and to places as far away as Iran and Italy. India has reported only 3 confirmed infections.

“As long as India can remain somewhat disconnected from coronavirus the country’s share market looks like a safe haven relative to the region,” said Ross Cameron, head of Northcape’s Japan office in Tokyo. Asia’s third-biggest economy is “fairly insulated” from external shocks due to its locally driven demand and the recent decline in oil prices, he added.

The BSE Sensex Index has declined 3% since Jan. 20, when a slide in Hong Kong stocks kicked off market fears about the pneumonia-like illness, compared with 6.7% slide in the MSCI AC Asia Pacific Index.

The outperformance has been helped by overseas investors, who have poured a net $3.4 billion into Indian stocks in 2020. In fact, India is the only stock market in Asia showing positive foreign inflows for the year, outside of China where data is unavailable.

Global Funds Load Up on Indian Stocks as Virus Shelter in Asia

“Maybe some money intended for other destinations” is flowing into India as the virus spreads, said Harsha Upadhyaya, chief investment officer for equity at Kotak Mahindra Asset Management Co. Ltd. in Mumbai. “Expectation is that the trend will continue.”

India’s central bank has forecast economic growth to rebound to 6% in the year starting April, from an estimated 11-year low of 5% in the current period. Indicators have already pointed toward a potential recovery, with the Markit India Services PMI index climbing in January to the highest level in seven years.

Some observers still see lingering domestic issues as a threat to the economic rebound. While Indian stocks have been more resilient than others, “worries over the slowing domestic growth, as well as concerns over the liquidity and solvency of the non-bank financing sector remain,” said Kristy Fong, an Asian equities investment director at Aberdeen Standard Investments in Singapore.

Still, the country’s lower rate of infection is seen as a positive factor for its stocks by portfolio managers including Krishna Kumar at Eastspring Investments. “It’s possible that India might be able to better weather any potential further sell-off,” he said.

The country’s market also may become more attractive for foreign investment if the decline in oil and other commodities persists and kick-starts the capital expenditure cycle, Kumar said.

©2020 Bloomberg L.P.

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