India's growth story appears good and industrial, capital goods along with PLI and China plus one theme may give healthy returns, said Nilesh Shah, MD, Kotak Mahindra AMC, in an interview with ET Now.
"I think overall India's growth story is good and we want to invest in good companies at good prices. As of today, we are bullish on the pharma sector. We believe the undervaluation will come into play and earnings as well as PE will get upgraded. We are bullish on industrial and capital goods along with PLI and China plus one – a combined manufacturing theme," said Shah.
Shah believes the PLI scheme announced by the government will result in a strong boost to many sectors.
"In 2013-14-15, there were three factories making mobile phones and total domestic production was about ₹22,000 crore. In 2022, there are more than 200 factories making mobile phones. Domestic production value is up 12 times to ₹2,20,000 crore. What happened in mobile phones will happen in many other sectors, courtesy PLI schemes, courtesy manufacturing becoming competitive and that will create this sector on a next probably multi-decade bull run," said Shah.
Shah also underscored the growing might of domestic investors as they have saved the market from falling into a bearish trap after a sustained selloff by foreign portfolio investors (FPIs).
"The amount of money which domestic investors have invested in markets during this downturn is truly amazing. In March and April 2020, FPIs sold ₹69,000 crore worth of equity and markets were down about 35 percent from 12,300 to 7,500. From October, they have sold ₹1,50,000 crore plus, and markets are down only 10-11 percent," Shah told ET Now.
"FPIs have become smarter from their experience in March and April 2020; and two, retail investors are showing tremendous maturity for the growth story of India and the credit goes to the media," Shah added.
FPIs have been on a selling spree in the Indian market, exceeding the global financial crisis (GFC) outflow of 2008-09.
In the year of the global financial crisis (FY09), FPIs sold Indian equities worth ₹47,706 crore but the equity barometer Sensex plunged 38 percent.
In FY16, FPIs had sold Indian equities worth ₹14,172 crore and the Sensex fell 9 percent.
In FY22, when the FPI selling was almost three times higher than the outflow during GFC, the Sensex jumped 18 percent.
We are witnessing consistent buying by domestic investors in the face of unprecedented selling by FPIs during rare and extreme fear-inducing events seen over the past few years, including the Covid pandemic and global brinkmanship due to the Russia-Ukraine conflict. This is a clear positive surprise and heralds the structural deepening of domestic savings into equities in India, brokerage firm ICICI Securities pointed out.
Meanwhile, analysts and brokerages highlight that even though India is witnessing FPI outflows, it remains the only attractive demographic market globally.