Economic growth exceeded 7% in 2014 and industry sources are forecasting that India’s growth will surpass China’s growth rate this year at 7.5-7.7%.
But there are growing concerns that initiatives started by Prime Minister Narendra Modi could be stalled due to complex legacy issues centered around tax reforms and public expenditure.
Three asset managment firms held the following views on Indian equities in 2016:
Peter Sartori, head of equity at Nikko Asset Management:
“We continue to view India as the market with the most structural growth potential in Asia over the medium term. Subdued inflation trends have enabled the Reserve Bank of India to ease monetary policy more aggressively. The introduction of the proposed new bankruptcy bill and the approved new `Ujwal Discom Assurance Yojana’ [a new scheme which provides for the financial turnaround and revival of power companies] bode well for the state banking sector but we continue to advocate positions with the private banks where fewer legacy positions exist.”
Adrian Lim, senior investment manager at Aberdeen Asset Management:
“India’s public sector lenders are in a bad shape – non-performing loans are a big problem. There’s been a lot of talk about having to recapitalise these banks and they are a source of concern for policymakers. However, we do like the private sector banks which beat the state=run lenders on almost every measure of performance – deposits growth, loans growth and balance sheet strength.”
Andrew Swan, head of Asian equities at BlackRock:
“India is displaying resilient growth and the market’s underlying drivers are broadly robust. There remain political challenges to meaningful reform though we see encouraging signals at the sector and state level. The power sector illustrates the reform impetus and we favour domestically exposed value and growth stocks.”
