As Indian equities come off the peaks from the start of the year, some emerging-market investors are cautious about future prospects, says Sukumar Rajah, senior managing director, director of portfolio management, Franklin Templeton Emerging Markets Equity.
Our view, however, is that the current investment environment, coupled with some home-grown drivers, could spur on the Indian equity market to provide even more opportunities than before.
There are plenty of reasons to be sceptical about the prospects for Indian equities, but we remain resolutely positive based on India’s compelling prospects.
Projected economic growth of an average 7.3 percent between 2018 and 2022 indicates that the success story shows no signs of ending soon.
We see the economy being able to shake off the effects of the recent global equity sell-off, the Goods and Services Tax (GST) introduced last summer, and the sudden demonetisation programme in late 2016. These developments temporarily affected cash-intensive industries and supply chains – especially with regards to small traders supplying to larger companies – as they found it difficult to meet the new paperwork demands placed on them.
As these effects begin to wear off, we think there is more room for Indian equities to potentially appreciate. Despite some outflows from last month’s global equity sell-off and the recent $1.8bn Punjab National Bank (PNB) scandal, we believe India’s favourable demographic backdrop could lead to more growth in the equity market, particularly in large-cap stocks.
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(Source: Arabianbusiness.com YouTube channel)