The MSCI India index gained 6% for the year and thereby underperformed emerging markets in general by almost 10%. It was a year when large companies did well and material underperformance by both mid and small size/cap companies. This can be illustrated by another index for India, the Nifty index, where the 500 index gained 7% while mid and small caps lost 4% and 9% respectively.
Major event for 2019 include a successful election in the spring where Prime Minister Modi will lead for another five years. Almost $14 billion of foreign money came into the equity market for the year, the highest inflow seen in five years. India’s government escalated efforts to repair economic growth with a surprise $20 billion tax cut, taking the rate for companies to one of the lowest in Asia. The Reserve Bank cut policy rates by 1.35% keeping the the repo rate at 5.15% and maintains an ‘accommodative’ stance.
On a negative note, the GDP growth rate declined from nearly 7% to 5%. GDP growth dipped to 5% in 2009, 2012 and 2013, and then recovered within a few quarters.
The longer-term growth momentum of India remains intact. The leader, Prime Minister Modi, has the ambition to make India a USD 5 Trillion economy by 2025, currently just under USD 3 trillion today.
Lastly, exciting news for equity investors April 1st is the increase in foreign ownership limit which will increase India’s weight in the important MSCI Emerging Markets index with about 0.7%.
Source: UTI, ICF, Enam, Bloomberg LP