Franklin Templeton MF Executive Sees Opportunity in Selectively Valued Indian Funds

Foreign Institutional Investor Outflows from Indian Equities: A Short-Term Concern

Foreign institutional investor (FII) outflows from Indian equities should be viewed as a short-term concern due to slow earnings growth, according to Avinash Satwalekar, President of Franklin Templeton Asset Management (India). Speaking on the sidelines of the AMC's first Specialized Investment Fund (SIF) launch, an equity long-short strategy under its Sapphire platform, Satwalekar stated that global investors have not turned negative on India's structural story, but are reacting to near-term earnings dynamics.

The current global environment is described as "a chaotic time," driven by tariff tensions, geopolitical conflicts such as the Russia-Ukraine War, and supply chain disruptions. Despite global headwinds, Satwalekar said India remains in a relatively stronger position compared to other large economies, even as growth estimates moderate. He pointed to structural drivers such as trade agreements with the European Union and improving efficiency in energy usage.

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Satwalekar also noted that weak earnings growth has been a key factor behind elevated valuation metrics and expects improvement over the coming years. He added that valuations in India have historically remained elevated, and waiting for them to turn "cheap" has often meant missing out on long-term gains. "India has never been cheap," he said. "If you had the argument that I'm not going to invest because it's expensive, for the last 40 years you have missed out on India."

The newly launched SIF allows for long-short strategies, enabling investors to take positions on both rising and falling stocks, which is an approach not available in traditional mutual funds. The NFO for Sapphire Equity Long-Short SIF opens on April 10 and closed on April 24. He said such strategies are particularly relevant in volatile markets.

Satwalekar also addressed questions on slow pace of traction in SIFs, attributing this to market conditions and investor behavior rather than limitations of the product. "If the markets were rallying, you would not be asking me this question," he said, adding that awareness of the category is still evolving.

On the recently introduced lifecycle funds category, Satwalekar noted that lifecycle funds as an effective way to align investing with long-term goals rather than short-term returns. "I think life cycle (funds) is brilliant (as a concept)," he said. "Look at it from the perspective of the investor, what that investment journey needs to be and the purpose."

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