Money managers' bullishness on India got a boost from the strong focus on developing infrastructure and other factors announced in the government's proposed budget, and a second rate cut last week have reaffirmed their overweight positions on the country.
The case for India as an investment destination has been growing, with an uptick in investment opportunities because of forecast GDP growth, beginning early last year. Then came a landslide victory for the Bharatiya Janata Party in the lower house of parliament in May, and a new prime minister, Narendra Modi, who had been chief minister for the state of Gujarat. Mr. Modi's reputation for creating jobs, pushing through projects and general success at the state level reinforced positive views for his role at national level.
The much-anticipated first budget announcement under the new government on Feb. 28 cemented money managers' overweight positions on the market.
“The previous government was not particularly business friendly — this one is,” said Richard Farrell, London-based associate portfolio manager at RBC Global Asset Management Inc. “We are very positive on the long-term outlook for India, and we reflect that in the weightings in our funds.” RBC GAM runs about $2 billion in global emerging markets equities strategies, with about $280 million focused on India.
Plus, India has potentially been the biggest beneficiary of the oil-price collapse over the past eight months, said Wim-Hein Pals, executive vice president, head of emerging market equities at Robeco Group NV in Rotterdam, Netherlands. “India pays $60 billion less (per year) on its energy bill now, (money) which is going into other productive areas.” Robeco is overweight India in all of its fundamental emerging markets equities strategies, and runs $20 billion across global emerging markets strategies. A breakout for India was not available.
India also moved up six places in BlackRock Inc.'s sovereign risk index update for 2014, published in January, to 36 out of 50. “India was the star performer of emerging markets in 2014 ... (with) the largest ranking gain,” the report said. BlackRock cited Mr. Modi and the Reserve Bank of India's governor, Raghuram Rajan, who have “sparked a wave of optimism on the Indian economy,” as well as an upswing in growth and a stabilized currency, as reasons for that bullishness.