After reaching a record high, the Indian stock market pulled back.

Today, India's SENSEX30 index fell 1.5%, and the domestic Indian fund LOF also followed the decline, currently falling more than 2%.

The country's stock market has just experienced its 8th consecutive rise as investors bet on India's booming economic growth prospects.

Despite the current correction, Wall Street investment banks are still optimistic about the Indian market.

Foreign capital inflows may accelerate

Recently, Goldman Sachs strategists said that once India's election is over, foreign capital may accelerate its inflow into the Indian stock market.

“Some people are still hesitating before the election. Once the election is over, you may see many people pour into the market,” said Sunil Koul, an Asia-Pacific stock strategist at Goldman Sachs in an interview.

He also added that overvalued stocks are a frequently mentioned reason investors stay away from the market, but increased earnings should solve this problem.

In 2023, global investors made net purchases of Indian stocks worth $21 billion, but before the April-May elections, the pace of capital purchases slowed down, and many funds still held small amounts of Indian stocks.

“If you look at the global capital pool, which is larger than that of Asia and emerging markets, you will find that the share of investment in India is still low,” Koul said.

Koul said that Goldman Sachs has a basic expectation of “policy continuity” after India's election and has increased its holdings in this market. The compound annual profit growth rate is expected to reach about 15% this year and next.

However, he added that the valuation will be limited, and India's Nifty 50 Index is trading at a premium of about 50% compared to the rest of the Asia-Pacific region.

He revealed that in recent months, many North Asian seed funds headquartered in Taiwan, Hong Kong, or mainland China, and even regional funds that traditionally focus more on Hong Kong and mainland China have shown interest in India. Additionally, funds from South Korea and Brazil are considering increasing investment in India.

J.P. Morgan is also optimistic

At the same time, J.P. Morgan Chase also said that India is its first choice in Asia and one of its favorite markets in the world.

“This is currently our number one market,” said Mixo Das, an Asian equity strategist at J.P. Morgan Chase. He stressed that India will continue to benefit from the shift in manufacturing.

Das pointed out that although Vietnam is also a strong competitor, India has sufficient scale to achieve the production capacity desired by the world.

Last year, Apple opened its first retail store in India and began manufacturing the iPhone 15 in India in August of last year.

Last week, India's largest automaker Maruti Suzuki announced that it would invest $4.2 billion to build a second plant in India.

Earlier this month, even Vietnamese electric vehicle manufacturer VinFast said it plans to spend about 2 billion US dollars to set up a factory in India.