Foreign investors persistently disappointed by India’s lack of growth, says Ridham Desai

On the broader market, Desai said midcap valuations need to go down a bit more before they become attractive. He prefers largecap stocks over midcaps citing valuations.

“Investors continue to be focused on bottom up ideas but on a top down basis we are finding a lot of other markets attractive and therefore India has kind of under performed all through 2017. It has gone little bit up and down surprisingly in the month of May and counter-intuitively India outperformed emerging markets. So let’s see how that pans out,” he added.

On the earnings front, Desai said, “We have been in deep earnings recession. This has been the worst earnings recession in India’s history. The draw down earnings from the top to the trough has been in excess of 20 percent – that exceeds previous earnings recessions.”

But the India equity research head at the global investment bank is optimistic about the country's growth trajectory as government ramps up investment, consumption recovers coupled with a pickup in exports.

According to Desai, on a relative basis, India has underperformed in terms of growth until now. If that changes over the next 12 months then foreign investors will be back.

“There are lots of other issues in India which foreign investors are worried about. So it is not just about earnings growth. They are worried about politics, they are worried about oil, they are worried about a slew of factors which is causing their sentiment to be a bit off-color".

So far this year, the rupee has weakened 4.83%, while foreign investors have sold $225.90 million and $4.45 billion in equity and debt markets, respectively.

 Foreign investors cutting exposure to India due to lack of growth, says Ridham Desai