Opportunities in India’s Budget

The 2016-17 Union budget is a move in the right direction, focusing on adherence to fiscal discipline, reviving rural India, and process simplification & institutionalization, according to Rahul Chadha chief investment officer at Mirae Asset Global Investments.

Key takeaways include:

  • India is increasingly more attractive based on the growing economy
  • Mirae maintains a bias towards domestic cyclical, benefiting from structural trends such as consumption growth, urbanisation and financial inclusion
  • Autos are one of the featured sectors in their India exposure. Some of the auto stocks have corrected in recent months, so valuations are becoming more attractive. While the purposed infrastructure tax of 1% to 4% on passenger vehicles may have a small negative impact in the near term, the sector remains very attractive when taking a medium term view – India’s passenger car market is only around 2.5 million units vs 22 million units in China
  • Banks are another preferred sector within their India exposure. In particular, they see consumer banks as a proxy to consumption growth in India, backed by strong credit growth of the under-leveraged Indian household. They are also seeing value in private sector corporate banks, which have lower exposure to the resource sector and have relatively healthier balance sheets compared to public sector banks
  • Outside domestic cyclicals, they seek to balance their exposure with high quality exporters in the IT services and pharmaceutical space
  • Mirae has not fundamentally witnessed any material deterioration in macro conditions so far this year. The fragile sentiment is a result of the macro tail risk from China
  • The government is developing rural infrastructure by creating long term irrigation programmes, road construction, village electrification, modernising land record and an e-market platform to nationalise farm product market. These all bolster Modi’s political capital
  • The “Make in India” campaign is having a positive impact with FDI up 40% during April-December 2015 compared to 2014. States with progressive chief ministers are leading in infrastructure spending and attracting investment but their work is quickly being replicated across the country
  • Consumer aspirations are rising across the country targeting products such as smartphones, health & fitness and branded goods
    • Digital media continues to be the fastest growing advertisement platform in a country with 350 million smartphones and 150 million Facebook users

Click here to read the full report: Mirae Asset – India Budget


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