BSE Sensex PEGR among the lowest; FIIs smell a windfall

Mumbai: India is likely to emerge as the most-favoured destination for the foreign institutional investors (FIIs) in the Asian region as the price earning growth ratio (PEGR) of the Bombay Stock Exchange (BSE) Sensex is the lowest among the other indices.

Currently, the PEGR of the BSE Sensex is estimated at 2.38 per cent compared to other Asian indices such as Hang Seng (3.82 per cent), Taiwan (5.36), South Korea (2.87) and Nikkei (6.71). Even, the PEGR of Nasdaq is estimated at 12.3 per cent and Dow Jones at 5.58 per cent, respectively.

According to market experts, the valuation of most Indian companies is still undervalued and with the BSE Sensex PEGR among the lowest, the FII money will continue to flow into the Indian markets. The FIIs have been aggressive buyers for the last eight months with the net investment crossing the $7-billion mark in December, the highest yearly investment by them since they started investing in Indian equities.

Credit Lyonnais, one of the leading FII brokers who routed over Rs 3,500-crore of portfolio investment in India, in its recent note said: "We have revised our growth outlook for India and now see the economy expanding at 9 per cent next year."

Says C Jayaraman, director, Kotak Mahindra Asset Management Company: "In the present bull run what we are witnessing is that the spectrum of FIIs operating in India has been increasing. There are funds from countries like France that are active in the Indian market. This shows that India's growth story is spreading across the world."

Says Ramdeo Agarwal, partner, Motilal Oswal Securities: "I expect the Sensex to break its all-time high of 6,200 in 2004 and the Indian markets will continue to attract huge FII inflow. The valuation of Indian companies are still very attractive and they are yet to benefit from the lower interest rate regime as the interest rates are expected to remain soft in the range of 6 to 6.5 per cent."

According to FII brokers, most foreign funds have outlined an Indian strategy and having Indian equities in their portfolio has become a 'must-have policy'. Says Rushabh Seth, equity head, Kotak Mahindra MF: "The valuation of most Indian corporates still looks attractive and sustainable as the BSE Sensex is trading at a P/E of 17.26 which was 24.3 in 2000."

Ambreesh Baliga, vice-president, private client group, Karvy Consultant, says: "The Indian markets have been giving attractive returns among most Asian countries and that is one of the main reason why huge FII money is flowing into the Indian markets. I expect the trend to continue for at least another couple of months."