FOMO will bring foreign investors back with bigger purse, says Sorbh Gupta of Bajaj Finserv AMC

Sorbh Gupta, senior fund manager—equity at Bajaj Finserv AMC, notes that foreign investors are showing renewed interest in the Indian stock market in an interview with BT Money Today. After a period of selling, there are signs that foreign institutional investors (FIIs) are ready to re-enter, this time with even bigger investments. This shift in sentiment can be attributed, at least in part, to the fear of missing out (FOMO) under the Modi 3.0 government, added Gupta.

Edited Excerpt:

It’s the third consecutive time that the same government has come to power. What are your expectations and views for the coming five years?

We anticipate that there will be broad policy continuity. Policies such as "Made in India" should be maintained, with an emphasis on renewable energy and infrastructure. However, since it's a coalition government this time, some focus should be on the demand side and consumption, especially boosting rural consumption.

PSUs, PSEs, and railroads all saw increases before the election results. Do you think there is a de-rating in any of these areas, and if so, how should investors who have already invested handle them?

Stock prices in these segments were doing well under the assumption that the government would continue to support them in terms of orders and capital. These assumptions can be tested as the government faces coalition pressure to divert spending towards consumption. This can result in a correction in some names, especially those with lofty valuations.

Which industries are most likely to prosper under the new regime? IT and FMCG stocks have recently gained strength. What are your opinions?

Rather than letting short-term market movements influence their investments, investors should focus on long-term investing and growth industries. Rural and consumer spending will likely be a renewed focus of government spending. Therefore, sectors like FMCG, two-wheelers, tractors, and rurally focused retail and finance should see earnings upgrades.

Regarding the IT sector, while it offers good diversification from domestic political issues, the impending US elections might result in volatility in tech stocks in the next couple of quarters.

Should portfolios be reorganized? What is the optimal asset allocation for someone in the 30- to 40-year-old age range to consider?

An optimal stock allocation should be both megatrend-anchored and well-diversified, considering the volatile nature of the markets. Investing in quality companies with reputable management should come first. Investors aged thirty to forty should allocate 70% to equities, 20% to debt, and 10% to gold. Engaging in systematic investment programs with a staggered investment horizon extending beyond ten years is advised.

In your opinion, how are FIIs viewing India for long-term investments? Will Modi 3.0 boost foreign investments in equities?

India is viewed as a potential long-term investment destination by FIIs due to its stable economic development, favorable demographics, and reform-oriented policies. Given the strength of Indian stocks, we believe that most FIIs would eventually return to the market with larger investments due to FOMO. Short-term investors can choose between long and short positions, although long-only funds, such as global pension funds and endowments, still present excellent investment opportunities for FIIs.

Are there any factors, according to you, that may affect economic growth in the next financial year?

A good monsoon is expected to improve agriculture and output. However, concerns about uncertainties surrounding geopolitics, high food inflation, and crude oil movements need to be monitored as they can impact the overall economy and inflation.