2017 was a great year for India. The steady focused prime minister, Mr Modi, and his BJP party hold a strong grip on the political agenda. The key event during the year was the continued fight on anti-corruption as seen from the demonetization campaign he ran and his pro-reform agenda as seen from the goods and service tax (GST) implementation. Government banks were recapitalized too. The reward of all these events came from India’s first Moody’s upgrade (Baa2) in 14 years as the rating agency awarded the sovereign upgrade due to a raft of policy changes. GDP growth is coming in at well over 6%, only beaten by a few peers such as Turkey and China.

Domestic investors keep investing in equities and we saw an average inflow of $2.5 bn a month whereas foreign investors have invested, on average, about ¼ of what domestic Indians invested. This is a trend we have hoped for many years and it is now happening, which is a great price setter by the locals. It all stems from lower interest rates and the governments focus on illicit holdings in real estate and gold. Inflation remains attractive and low at 4-5%.

The Indian macro story looks attractive with minuscule fiscal and accounts deficits, savings of $400+ bn, a stable currency and a strong and focused government which helps shape an attractive investment theme.

Source: Bloomberg, Trading Economics

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