Portfolio managers try to navigate the pandemic in India by concentrating on the country’s long-term growth prospects.
The pandemic has exacerbated the health crisis, but stock outflows have been restricted and the currency has recovered, indicating investor interest in the economy.
Despite the fact that India is attracting all of the world’s attention due to the worst virus epidemic in history, the pandemic has done little to shake the optimism of foreign investors betting on a quick recovery.
Portfolio managers are attempting to navigate the pandemic in India by concentrating on the country’s long-term growth prospects, with demand expected to fuel a recovery once the virus crisis has passed. Although the epidemic has fueled the world’s worst health crisis, investors’ optimism in the South Asian economy is reflected in limited stock outflows and a currency rebound.
“The second wave will temper economic growth in 2021, but growth will be high this year, and the long-term outlook is very positive,” GW&K Investment Management co-portfolio managers Tom Masi and Nuno Fernandes said. “Short-term investors will be forced to exit, however long-term investors will see the opportunity.”
The S&P BSE Sensex stock index in India has dropped about 4% since its peak in mid-February, outperforming the MSCI Asia Pacific index, which is down more than 7%. Global funds withdrew $1.5 billion from the country’s equities in April, compared to $8.4 billion in March 2020, when the pandemic was at its peak.
Both Amundi SA and Principal Global Investors LLC have a large position in Indian stocks.
According to Jeff Kilkenny, portfolio manager at Principal Global Equities, India’s stock market “possesses many fundamental growth prospects that we do not expect to be significantly impacted by the current virus surge.” Infrastructure, personal mobility, and insurance are some of the industries that he sees as promising.
The rupee is also common among investors. The currency has recovered from its worst performance in April to become Asia’s best performer in May, and BlackRock Inc. expects it to stay supported as India’s imports decline, helping to shore up the current-account balance.
To be sure, if the epidemic worsens, the picture might change. M&G Investments is taking a cautious approach and is shorting the Indian rupee.
“A lot of the dollar-rupee correction from the April virus spike may be behind us, and the bad news may have been priced in,” M&G fund manager Eva Sun-Wai said. “Having said that, I’m not interested in increasing my exposure to India just yet. The likelihood of a Covid mutation is high, and equity outflows are likely to continue.”