Goldman Sachs bullish on India Inc earnings

The flow of foreign institutional investors' (FIIs) money will not dry up. It can only swell. Goldman Sachs International has taken a group of more than 20 chief investment officers and heads of equities of pension funds, mutual funds and big hedge funds from UK, US, Germany, Australia, Europe and Middle East on a India interface tour. The objective is to sell India story to them and increase their India exposure.

Collectively, the funds have assets under management of almost $4 trillion "" many times more the market cap of the Indian bourses. Almost all of them have some exposure to India already and are looking to hike it soon.

"The outcome of the meetings are postive and we expect them to put in more money in India," said James Birch, managing director, Institutional Client Services, Equities Division, Goldman Sachs International.

On a week-long tour to India, the team of high profile investors met finance minister P Chidambaram and other North Block officials besides the Tatas, Reliance, Aditya Birla group, Maruti Udyog, Biocon, Housing Development Finance Corporation and some of the infotech majors.

A similar trip of investors was arranged by Goldman Sachs in China twice over the last two years. "We may bring in another team next year to India," said Birch.

Goldman Sachs has an official recommendation on India to their investment clients and are positive on India, China, Taiwan and Thailand and are neutral on Hong Kong and South Korea. They are negative on Australia, Indonesia and Singapore.

The reason for being positive on India is because most large Indian companies have high earnings growth, reasonably attractive valuations, good management and competitive with global companies. Goldman Sachs is underweight on Europe and neutral on the US.

Birch said the team is very impressed with India but said that India is much more complicated and issues are more complex here. Valuations are attractive but the biggest risks are implementation and execution of infrastructure changes.

The collective exposure of the team of investors to Asia would be about 5-6 per cent, in line with the MSCI Asia weightage. They are keen on IT, energy and autos sectors in India while they are relatively cautious on Banks and telecom, Birch said. He added that they continue to remain overweight on India and their medium target for the BSE Sensex is 6200.

FII investments in India till November 3 was Rs 26,646 crore. In the last calendar year, the investment was above Rs 30,000 crore.