Kristy Fong, Asian Equities Investment Director, Aberdeen Standard Investments, comments:
“A continuation of Prime Minister Modi’s structural reform agenda would provide a lift to the economy and to corporate India. It would also likely spell good news for stocks.
“We can expect the government to continue pouring money into affordable housing and transport infrastructure, which bodes well for the cement sector, real estate and potentially rural consumption. It could spark a renewed capital expenditure cycle. All of this would provide a cushion to external headwinds, including a deterioration in the US-China trade conflict and any surge in oil prices.
“Political continuity only reinforces our positive views on India, whose growth prospects are underpinned by a young population and expanding middle class. We see a huge opportunity to invest in companies with pricing power that sell to Indian consumers. The country boasts a diverse mix of well-managed domestic champions and offshoots of multinationals, supported by a culture of entrepreneurship and innovation. Traditionally strong IT and engineering skills also feed well into the digitalisation trend we see globally.”
Leong Lin-Jing, Investment Manager, Fixed Income, Asia, comments: “If vote-counting maintains its current trend, the stronger mandate handed to the Bharatiya Janata Party (BJP) would certainly quicken the pace with which Prime Minister Narendra Modi can implement his structural reforms. From a purely bond market perspective, it would allow him to uphold his fiscal consolidation stance.
“It means we would be assured of a prudent attitude towards social spending, further privatisation of the public sector and continued efforts to simplify and strengthen the Goods and Services Tax (GST). Potentially, an enlarged BJP majority could also see renewed efforts to introduce the land acquisition bill – which would strengthen property rights – and even reform archaic labour laws that hold back productivity in the manufacturing sector.
“The successful execution of the insolvency and bankruptcy code and corrective action to rein in non-performing loans in the public banking sector would enable financial institutions to support the next round of credit growth. If Modi can implement the rest of his reform measures during his second term, it will certainly increase India’s growth potential.”