• Home
  • Prospects of...

Prospects of Indian equities still bright

Added 9th April 2015

The government’s efforts to support economic growth and the easing of inflation should provide long-term support to local shares, said Manish Bhatia, Schroders Indian equities fund manager.

Prospects of Indian equities still bright

Indian equities outperformed last year, with the MSCI India Index posting a gain just over 20%, and the positive investor sentiment should continue, he said.

“One of the key factors driving this optimism is that India’s chronic inflationary pressures, which have plagued the economy over the last few years, have finally started to subside.”

Weak commodity prices, particularly the fall in oil prices, has resulted in bringing down the inflation to the current level of around 5% compared to 11% at the end of 2013.

India is a net oil importer and the government’s balance sheet is currently benefitting from lower oil prices, which reduces both import costs and fuel subsidies. 

However, Bhatia highlighted that a significant reversal in oil prices could be a dampener.

“The key risk would be a reversal of the sentiment that has been driving stock prices, namely the reversal of weak commodity prices,” Bhatia said.

Apart from this, India like any other emerging market, could see fund outflows if the US dollar continues to strengthen.

Vast long-term growth potential

Even as these risks persist, the strong mandate awarded to Prime Minister Narendra Modi and his reform-minded government makes it more likely that India’s “vast” long-term economic growth potential will be realised, Bhatia said.

Although the Indian budget presented at the end of February had no “big bang” reforms, there were still some positive measures, Bhatia said.

“These included a 25% increase in budgetary allocations to infrastructure capital expenditure, which should support growth given the economy’s infrastructure is in dire need of investment."


Economy sheltered from crisis?

Bhatia believes a regional or global economic slowdown would have little impact on the Indian economy.
“India’s economy is largely domestically-driven and if there is a global slowdown, then it should only negatively impact niche sectors like information technology services, which derive most of their revenues from developed economies.”
India has limited trade flows with the rest of Asia. 
Therefore, China’s slowing GDP growth should have relatively little impact on the economy, Bhatia added.
A look at the one-year performance of Schroder ISF Indian Equity Fund against its benchmark index:
A look at the run-up in key Indian indices in 2014:

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address


FSA Investment Forums: Singapore & Hong Kong 2016

Singapore, Tuesday 25th October

Hong Kong, Thursday 27th October

FSA Investment Forum: Manila 2016

Wednesday 23rd November