Slightly Optimistic
Mirae Asset Global Investments released the Mirae Asset India Bond Fund on April 28. Samsung Asset Management is planning to launch a small-cap fund investing in India in partnership with Reliance Capital, one of the largest asset management firms in India. Last month, Korea Investment & Securities released a bond trust fund investing in India, too.
This trend in the industry reflects the stable growth of the Indian financial market as of late. Two years ago, India suffered a massive capital outflow amid predictions about quantitative easing in the United States. Investors shunned India, and some securities firms such as Yuanta Securities have stopped selling Indian bond funds. However, things began to change last year. Dropping oil prices, expectations for Modinomics, and liquidity supply boosted the stock market. India funds recorded an average rate of return of 56.52 percent last year and the percentage has reached 8 percent this year.
Financial companies are focusing on the recovery of the Indian economy that has picked up speed since August 2014 and the IMF’s recent forecast that the Indian economy would attain a 7.5 percent growth in 2015. “The public bond yield amounts to 8 percent or so in India these days, and US$6 billion is expected to flow into the bond market based on the recent upward adjustment of the credit rating by Moody’s and a continuous interest rate cut,” a Mirae Asset Global Investments representative explained, adding, “In short, India is a viable alternative for those who seek to avoid today’s low interest rates.”
Still, not a few experts are cautious about investment in India, mentioning such variables as the foreign exchange rate and interest rate hike in the United States. The Indian stock market lost approximately 1 percent on April 27, remaining bearish for three trading days in a row with the trading volume hitting a three-month low. The downturn was led by real estate, energy, pharmaceutical, bank, and mobile stocks due to the ongoing concerns over corporate earnings. Foreign investors continued to sell as well.
“It cannot be denied that the Indian stock market has abundant potential, but an interest rate hike in the U.S. could trigger a capital outflow at any time,” said research analyst Kim Doo-eon at Hana Daetoo Securities. Choi Jin-ho at KDB Daewoo Securities added, “Modinomics raised the stock price, but the financial ministry’s plan for the retroactive application of taxation on foreigners is working the other way around, and investors would be well advised to take a cautious forex hedge approach.”