Foreign institutional investors appear to be coming into India in droves, but interestingly the research wings of many FIIs are bearish on India! Indeed, while there is some divergence in views when it comes to emerging markets, most analysts are united on India being too expensive to yield more profits.
So, while Morgan Stanley put out a report saying emerging markets were the place to be, UBS has just put out a report saying emerging markets may be overvalued and that their returns were now on a par with those in the rest of the world "" investors, the report says, "should take caution from extrapolating the ability for emerging markets to sustain premium valuations". UBS ranks India 15th among 16 countries in terms of risk and suggests investors look for higher risk premiums here. Even Morgan Stanley, which believes emerging markets are the flavour of the year, believes India's upside is limited. Another report, from Merrill Lynch, does a poll of fund managers "" half say emerging market corporate profits will fall in the next year. When asked which BRIC market they preferred over the next year, the proportion in favour of India was minus 42 per cent in September compared to minus 32 per cent in August. And yet the funds continue to flow in!
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