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    Indian market valuation main concern for foreign investors, bullish on banking space: Credit Suisse

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    Indian market valuation main concern for foreign investors, bullish on banking space: Credit Suisse

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    Dan Fineman, Co-Head-APAC Equity Strategy, Credit Suisse, on Tuesday, said that the main concern for foreign investors are the current valuations of the Indian market. He mentioned that he remains bullish on the banking space. He believes Indian banks are the most appealing in Asia as well as within any other emerging market (EM).

    Dan Fineman, Co-Head-APAC Equity Strategy, Credit Suisse, on Tuesday, said that the main concern for foreign investors are the current valuations of the Indian market. He believes the Indian market is close to a bottom now.
    "The main concern for foreign investors is the valuations. If you look at the multiples of India relative to other markets in the region or globally, they are quite rich compared with where they have been historically. But if we get EPS earnings upgrades from the Street in line with what we are expecting, then those valuations will look a lot more reasonable. So as with some other places, I think that India is probably close to a bottom now," he said.
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    Among sectors, Fineman remains positive on the banking space. He mentioned that banks in India are fairly special and hence he remains confident of the space doing well. Elaborating further on this point, he mentioned that Indian banks are infact the most appealing in Asia and within any emerging market (EM) for that matter. However, he cautions that Chinese banks could see margin pressure on account of the lower interest rates.
    He said, "We like banks on a global basis. We like them within Asia, as well as in India. I would say that Indian banks are among the most appealing banks in Asia and in any emerging market. They have got good structural growth, there's low credit penetration in India, and you have got a good cyclical upturn lying ahead for Indian banks."
    "Chinese banks, on the other hand, are facing lower interest rates, which could pressure margins, the growth is not as supportive as in India. So I do think that Indian banks are fairly special in a sector that generally should do pretty well this year," he mentioned.
    On developed markets (DMs) vs EMs, Fineman explained that there is a lot of variation in the market and hence it wouldn’t be prudent to categorize all DMs in one group. His stance in this regard remains more nuanced.
    "I think it's a bit hard to put all developed markets into one group and all EMs into another group. There's a lot of variation within each of those categories, for example, Continental Europe or Japan look much better than the US does right now, both in terms of valuations and in terms of their capacity to absorb higher inflation," he explained.
    "Similarly, in EMs, there's a big difference. Asia, looks fairly well positioned right now in a high growth environment and historically it hasn't been that hurt  by higher rates. On the other hand, you have got Latin America, where I think markets are much more vulnerable to Fed rate hikes than in Asia. So I wouldn't really be talking about DMs versus EMs, I would try to be a little more nuanced," he said.
    Meanwhile, on the US market front, Fineman believes the Fed’s priority will be regaining market trust. According to him, even if the Federal Reserve hikes interest rates 4 times this year, the monetary policy will continue to be accommodative.
    He said, "The Fed is always going to be cognizant of financial stability issues, but I don't think it's going to be fazed by day-to-day trading or even a correction in equities market. What we have seen so far poses no real stability risks."
    "We have to keep in mind that even if the Fed hikes rates 4 times this year, monetary policy in the US will remain highly accommodative and supportive of equities. I think that the Fed is going to keep its eye on regaining the market's trust as far as its ability to contain inflation goes," he added.
     Watch the video for the full interview.
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