India Needs 10% Earnings Growth for FIIs, 7 Points

Delhi / New York

FIIs Exit India with 30% Underperformance Since 1990 – JPMorgan Flags 3 Hurdles

1. JPMorgan’s Outlook on India

1. Rajiv Batra, Head of Asia & Co-Head of Global EM Equity Strategy at JPMorgan, highlights 3 hurdles India must clear for FIIs (Foreign Institutional Investors) to return.

   • US–India relations thaw

   • Earnings growth revival

   • Next wave of policy reforms

2. He shared insights at JPMorgan’s 10th India Conference in Mumbai.

2. FII Exodus: 4 Years of Outflows

3. FIIs have pulled money out of India for 4 consecutive years.

4. India recorded the worst underperformance since 1990 at 25–30% below peers.

5. Other EMs like Korea, Taiwan, China rallied due to strong domestic inflows.

3. Hurdle 1: US–India Relations

6. A thaw in trade ties could trigger Indian equity re-rating.

   • Example: Tariff cut by 25% could lower risk premium.

   • Result: Higher PE re-rating similar to other EMs.

4. Hurdle 2: Earnings Growth

7. India’s trailing 12-month earnings growth stuck at 4.5–5%.

8. Valuations remain elevated at 22x PE ratio.

9. FIIs expect double-digit earnings growth before re-entry.

5. Hurdle 3: Policy Reforms

10. Past reforms included:

• Monetary easing

• Corporate tax cuts

• GST overhaul

11. Market now awaits a “fourth arrow”:

• Deregulation

• Easier FDI and portfolio investment rules

• GST 2.0

12. Consumption-led growth expected in next 4–5 years, driven by:

• Autos

• Jewellery

• Other discretionary spending

6. Emerging Markets Performance Outlook

13. EM equities may deliver 20–25% upside in next 12 months.

14. Currency effect:

• 1% USD depreciation = 4.5% EM equity rise

• USD fell 12% in 2025 → more upside pending

15. JPMorgan forecasts:

• US Dollar Index (DXY) to 95 by end-2025

• DXY to 92 by mid-2026

7. Global Cycle Impact

16. Global markets entering synchronized easing cycle.

17. Regional EM indices may trade at 20x PE in near future.

📌 Disclaimer

This article is curated for informational purposes only by The Profit India. It does not constitute financial advice. Investors are advised to consult professionals before making investment decisions.