The recent outperformance in Indian stocks may eventually fade.
That’s according to Ronald Chan, Manulife Asset Management’s chief investment officer for Asia ex-Japan equities. Indian shares have yet to price in the nation’s slowing economy, which could expand at a rate of between 4.5% and 5% amid ongoing struggles with credit issues, sluggish consumption and conservative stimulus policies, Chan said. Growth of 5% would be India’s slowest pace since 2009.
The benchmark S&P BSE Sensex Index climbed for a third day Wednesday, quickly recovering from the losses triggered by Prime Minister Narendra Modi’s latest budget. The gauge is down only 0.3% this year, compared with declines of more than 1.5% in the MSCI Asia Pacific Index and the MSCI Emerging Markets Index.
The current relative strength in Indian equities may be due to a handful of top-weighted stocks outperforming and to inflows from investors avoiding markets more affected by the Wuhan coronavirus, Chan said by phone Tuesday. “Once China stabilizes, I think people would come to the reality that India’s growth trajectory will get lower," he added.
Chan is underweight India equities and has been cautious on the country’s industrial and consumer stocks. On the other hand, exporters, such as some IT and pharma companies, may take the spotlight this year, as they might benefit from a weaker rupee, he said.
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