Indian stock markets are expected to perform well in the second half of 2022, although most Asian economies may continue to struggle this year, a senior Singapore-based business executive said on Tuesday. “India has been an exception as economic activity has rebounded quite strongly. India’s GDP growth forecast is expected to be over 7% for the year, making it the largest growing economy fastest in the world,” said Praveen Jagwani, CEO of UTI International. Although India’s foreign portfolio investment (REIT) outflows topped $30 billion in the first half of 2022, reflecting a global view of risk, Jagwani noted that there had been an equal amount of injection into the equity market by domestic institutions.
“Thus, local sentiment on the economy remains strong, cementing fundamental belief in India’s growth story. As a result of these relative flows, the aggregate REIT ownership of India’s 75 largest companies is below 25% for the first time since 2010. these companies,” he pointed out.
Jagwani, who has 28 years of experience working in the global banking environment, added: “Over the past two years, retail investors have become increasingly interested in equities. The growth of start-ups and unicorns has captured the popular imagination. In a fast-growing economy, stocks tend to be the most liquid asset class and offer the highest inflation-adjusted return. “Therefore, we believe equities will be the fastest growing asset class in India,” he said. According to the investment banking veteran, India has only three listed real estate investment trusts (REITs) covering 25% of the organized office space in India.
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“REITs have not performed well during the Covid shutdowns and, understandably, as the shift to remote working has created uncertainty around long-term demand expectations for commercial real estate,” said Jagwani. After Covid, the demand for office space seems to be normalizing again. Even though the tech industry has shifted to a hybrid work model, strong hiring in the sector has offset its impact on demand, he said.
“With a dividend yield of nearly 5-6%, the overall expectation for REITs is that they will deliver a yield of more than 15% over the next year,” Jagwani told PTI. Yet bond markets are still difficult to access for international investors, while investing in stocks is much easier, he said. Relevant regulations for investing in India are Foreign Exchange Management Act (FEMA), Foreign Direct Investment (FDI) Policy and Non-Debt Instruments (NDI) rules.
“As India becomes an increasingly important part of the global economy, investors will seek easy access to the Indian bond market,” Jagwani said. Citing an EY report, he said India is expected to attract between $120 billion and $160 billion in FDI annually by 2025. Last year, the United States and Japan were among the top five countries in terms of FDI inflows, cumulatively investing about 12 USD. billion in India. Europe, the Netherlands, the United Kingdom, Germany and Cyprus were the main investors with an investment of 7.3 billion dollars.
“China has also been a big investor, but due to data privacy concerns, its FDI is subject to much more scrutiny,” Jagwani said. Services Collection of taxes and withdrawal of credits, etc. Even future revenue forecasts are quite optimistic, he added. ) sector in the country. As a result, asset quality has improved and banks’ balance sheets are now in much better shape.
“All major private banks posted excellent results with double-digit year-over-year growth and net profit while maintaining stable asset quality. The outlook for the future also remains positive with the growing penetration of financial services,” he said. Jagwani said the recent move by the Reserve Bank of India (RBI) towards the internationalization of the rupee is a historic first step towards improving the current account deficit and reducing currency risk for India.
The Ukraine crisis has presented India with an extraordinary opportunity to advance this agenda. An increase in demand for the rupee globally would reduce the demand for the dollar in the long run. Ultimately, this would reduce the depreciation pressure on the rupee and help preserve the country’s foreign exchange reserves,” he said.
“A gradually weakening rupee certainly boosts our export competitiveness in world markets,” he said. But there is a downside to this, as a steadily weakening rupee can erode investment returns and can be seen as a red flag for potential investors, Jagwani said.
“So the move to settle international trade in bilateral currencies could be a boon for India,” he said. “This year, the Indian Rupee has outperformed the Yen, British Pound and Euro against the US Dollar despite downward pressure from REIT outflows, rising energy prices and rising interest rates. of the Fed,” he said.