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India’s stocks will make a comeback as the economic benefits of a landmark corporate-tax cut prevail against concerns over a shadow banking crisis, according to AMP Capital Investors.
Shadow banking incidents are unlikely to derail the positive backdrop for India equities following the tax cuts, said Nader Naeimi, who oversees more than $1 billion in assets at AMP Capital. Indian firms have now become a lot more competitive, which will attract many investors, even those that had valuation concerns.
Naeimi’s funds went from having no exposure to Indian stocks to boosting it to 5 per cent of assets after Narendra Modi delivered a Donald Trump-style cut in corporate taxes on September 20. He is looking to buy more.
AMP Capital is sticking to its bullish stance despite the markets recent rout. The benchmark S&P BSE Sensex Index has given up almost half of the surge it saw after the tax cut, as bad-loan concerns emerged at lenders including Indiabulls Housing Finance Ltd. and a cooperative bank.
Naeimi expects the Sensex index to rise by more than 20 per cent in the next two years. The gauge dropped 0.4 per cent to 37,531.98 on Tuesday, sliding for a sixth day.
The tax cut has put Indian stocks on the path of a multi-year bullish phase, the fund manager said.
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