Shankar Sharma, vice-chairman and joint MD, First Global

While India’s GDP growth hovering around 5% last year, was the lowest in the decade, the 3.8% global GDP growth was the highest in the decade. FIIs thus chose to invest in other EMs, unlike local investors who invested in equities, despite poor earnings growth, because of lack of alternatives. Since FY15, declining oil prices have saved the government $180 billion, which comprises around 7.5% of GDP. Now, with oil prices increasing, and the government having spent 95% of its total allocation for the year, there is mounting pressure on the current account and on the fiscal front. This along with increasing inflation and tepid earnings growth will dominate the macro-economic scenario in CY18. Being an election year, one can expect various populist measures by the Centre, which inevitably translate into imprudent economic outcomes, something the market is always wary of. The Gujarat election results have also increased the political uncertainty, further contributing to the erosion of sentiment in the market. FIIs will be cautious.

Aashish Agarwal, head of research-executive director, CLSA

FII inflow during CY17 was roughly $8 bn versus an average inflow of $13 billion/year over last five years. They reduced their India weights due to expensive valuations and more attractive opportunities present in EMs such as China and Korea, which saw earnings upgrade. A good part of the earnings downgrade that India witnessed over last two years were due to disruptions caused by demonetisation, GST and RBI-mandated NPL recognition. Now, on a benign base India is set to witness strong earnings growth from 2HFY18; 15%+ earnings growth in FY19 also appears achievable as pro-growth policies (GST & PSU bank recap) will drive growth momentum. The recovery of earnings could moderate the currently elevated multiples and revive FII interest in all likelihood. Secondly, significant part of the rally in developed markets and other EMs were led by tech companies where India does not offer listed plays. After the significant rally in tech, rotation is expected, which should further benefit India in 2018.