Global experts positive on India, expect midcaps to outperform largecaps

The leads and wins indicated BJP-led National Democratic Alliance is expected to form the government at the Centre for the second time in a row, which propelled Sensex, Nifty50 and Bank Nifty to record highs.

The BSE Sensex hit a historical high of 40,000 (rallying more than 1,000 points) and Nifty50 touched 12,000 intraday, but profit booking later brought both indices in the red.

Considering likely another landslide win for Narendra Modi, global experts agreed that FII inflow into India will continue going forward, but the key risks that can not be ignored are global growth concerns and oil price (if rises).

On the domestic front, the complete resolution to liquidity crisis is the key factor to watch out for going forward.

According to them, midcaps are expected to see more action than largecaps in coming months and sectors to outperform will be financials, consumption and infrastructure.

Here are global experts who shared their views on CNBC-TV18:

Mark Mobius, Founding Partner of Mobius Capital Partners

India is doing better than China.

China has the biggest weightage of 30 percent in emerging market basket and India has less. But I hope India's market capitalisation will go up.

We started investing two months ago. We like some companies in finance, cement, piping, cable etc. We also like consumption space.

Key priorities for the government from here on would be more infra spending, reform in the labour market (as unemployment is too high in India) and streamlining of bureaucracy.

Global growth concern and any rise in oil price are risks for India.

Among emerging markets, India is the top choice, though China is an important one.

Arvind Sanger, Geosphere Capital Management

BJP majority would be very positive for the market sentiment. Less than 250 seats for BJP might lead to a correction whereas more than 300 seats for BJP would result in a rally.

The hope is that the new government would hit the ground running from Day 1.

The new government needs to address the issue in financial and NBFC space.

Midcaps, which have been negatively impacted by liquidity and corporate governance issue, are not going to outperform only on the back of the election outcome.

It is a good time to buy quality midcaps. Midcaps are virtually at record low valuations relative to largecaps.

Infrastructure names look interesting in the midcaps. A stable government would be positive for infrastructure stocks.

Markets are not driven by a single factor. Hence one needs to be cautious of global and domestic macro headwinds.

Teresa Barger, Co-Founder and CEO, Cartica Capital

What I am really interested in are the Indian investors that have been on the sidelines; whether they have the confidence to come back in the market and particularly in the small and midcaps.

Foreign investors certainly will take heart from a fairly large National Democratic Alliance (NDA) victory. I think I am more interested in what the domestics are going to do.

To the extent that the new government can move right away on the non-banking financial companies (NBFC) front and we can get a little bit of calm and some of that pricing action absorbed by the market in this critical auto and two-wheeler sector then I think we can get back to normal and then we can see the reversion to the mean on this midcap and play out over the rest of the year.

We have already invested in financials. We are in financials with very good asset liability management.

Looking forward, we are interested in stocks that play to the big domestic market and whose competitors are the unorganised sector that is going to be affected by goods and services tax (GST) as they are coming to the tax net. So we are very much in favour of these listed companies who are per se formal and tax compliant, whose competitors are going to be going through a tough time. So that is what we favour.

About the market outlook, I think it is possible for India to go higher because this has been such a narrow rally, there is an opportunity to broaden the number of companies that are participating in the stock market going forward and that is what I would look to stay for the rest of the year.

Adrian Lim, Investment Director, Asian Equities, Aberdeen Standard Investments

A solid majority would give the new government greater flexibility to go ahead with reforms.

It has been clear over the last five years that the incumbent government was keen on expediting India's progress by building stronger infrastructure and a framework for economic development and inclusion. A strong majority would give it the affirmation that it is on the right path.

Talking about investments, he said the firm has a disproportionately large exposure to India within the region.

Given the large economy, implementation of reforms is challenging but India has a lot of companies that would do well going forward over the medium to longer-term horizon.

We are overweight on India and based on fundamentals and what we see with respect to companies' quality on the ground, we will continue with our overweight exposure.

One could look at pockets of softness in some of consumption names amid this cyclical weaknesses. However, they should not stray too far from the larger, stronger names, for example like Asian Paints.

One can also look at playing the urban consumption theme through staples, as well as financials like HDFC, HDFC Bank and Kotak Mahindra Bank.

Mohammed Apabhai, Citi

India will get FII inflow after election verdict.

Outperformance of India among emerging markets is quite significant. I think a lot of money is coming to India even though the economy is not very strong.

Once elections and RBI policy get over, there could be some breather in the Indian equity market.

Punita Kumar, Pacific Paradigm Advisors

FII inflow will continue as India will be going to be pocket of stability and reform.