Net foreign inflows have remained weak for three years and FPI trading has fallen to 30% from 50%
Swiss multinational investment bank Credit Suisse doesn't see foreign inflows into equity rising in 2019 owing to the global context of slower growth, high rates, less liquidity and more volatility.
On the Indian economy, Credit Suisse said the economic momentum is slowing down currently, dragged down by weak consumption as demand is dissipating, with the Pay Commission effect waning.
Credit Suisse, in its outlook for Indian market in 2019, said, “The FPI flows are coming off from around $20 billion a year earlier, this year there is absolutely no foreign portfolio investors (FPI) buying. Net foreign inflows have remained weak for the last three years and FPI trading has fallen from 50 per cent to 30 per cent in the last three years,” Neelkanth Mishra, managing director and India equity strategist, Credit Suisse, said.
NSDL data shows foreign portfolio investors were net sellers of equities worth Rs 33,194 crore so far this year and FPIs have sold debt papers worth Rs 50,797 crore.
From a global market perspective, 2019 may see a lot of volatility, but the Indian market may not be as volatile as the world market despite foreign flows coming down, as domestic flows are acting as a calming force, Mishra said, adding, “I don’t see it coming off in the near future.”
“Global growth is slowing, risk is they keep getting cut, after two years of growth forecasts getting revised upwards, downwards revisions have started, monetary conditions are expected to tighten as a reversal of quantitative easing as global growth is starting to come off, with major central banks expected to hike rates in 2019,” Mishra said.
Balance sheets of the US Federal Reserve, European Central Bank, Bank of Japan and Bank of England should be down by 2.7 per cent in a year and by 6 per cent by end of 2020.
For 2019, Credit Suisse is overweight on industrials, metals, energy, private banks, utilities, IT and PSU banks and underweight on discretionary, staples and NBFCs.
On the Indian economy, Swiss investment bank said weak consumption is driving down the country’s economic momentum. “We expect growth to slowdown further in first half of 2019. Two- year CAGR of GDP growth was steady at 6.8-7.0 per cent since mid-2017, but recently dipped to 6.7 per cent dragged by consumption,” the report said.
“There was a sudden and sharp rise in consumption due to the Pay Commission’s pay hike of government employees, with the total increase being Rs 4.5 lakh crore, or 3 per cent of GDP. This is the year (2019) Pay Commission effect will go away. Demand is dissipating, Diwali sales were down,” Mishra said.