The outflow of foreign institutional capital from Indian equities and into China is "fleeting" and a result of temporary adjustment by large fund houses to reposition in an underweight market, according to Samir Arora, founder of Helios Capital.
"If someone wants to invest in China with a fixed amount of money, there are many places to move out from," Arora told NDTV Profit, counting Taiwan and South Korea among probable hubs.
He said for the short term, hedge funds and other institutional investors that were "extreme" underweight on China will now be ploughing into mainland stocks. Change in weightage in emerging market benchmarks will have a marginal impact, added Arora.
Samir Arora, founder and fund manager, Helios Capital. (Source: NDTV Profit)
"India in absolute terms, if not relative, better off if equities in China do well," Arora said. He explained that there was a cautious view on Indian valuations that were trading at a higher premium over emerging market peers all while China was doing poorly.
"If all other markets like the US and China do well, then there is less reluctance on the part of Indian mutual funds sitting on cash (to invest). We may be less up, but not down compared to the rest," the fund manager said.
He also noted that last week's decline in Indian stocks was also influenced by the market regulator SEBI's new curbs in the derivatives segment and not just a reaction to events in China.
He said the trend of exit-India-enter-China will last for less than 30 days as long-term capital deployment of overseas investors will stay intact.
"It's possible new money goes to China and it may outperform India for some time, but it's like value stocks outperform growth stocks for some time. It's unlikely that we will be negative," he said.
Arora also noted that domestic investors have been lapping up shares offloaded by foreigners as evident by daily data shared by the exchanges, showing a clear buy-on-dips strategy.
India Vs. China—Samir Arora Weighs In|Watch
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