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Why It's Not Time To Squeeze The Brakes On Indian Equities

Mar. 05, 2018 4:48 PM ETEPI, INDA, INDY, INDL, PIN, INXX, IIF, INP1 Comment
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Franklin Templeton

As Indian equities have come off the peaks from the start of the year, some emerging-market investors may be feeling a little cautious. Despite this pullback in stocks, Sukumar Rajah, Senior Managing Director and Director of Portfolio Management, Franklin Templeton Emerging Markets Equity, thinks the current investment environment, coupled with some homegrown drivers, could spur on the Indian equity market to provide even more opportunities than before.

By Sukumar Rajah Senior Managing Director, Director of Portfolio Management, Franklin Templeton Emerging Markets Equity

There are plenty of reasons to be sceptical about the prospects for Indian equities, but we remain resolutely positive, based on India's compelling growth prospects. India's projected economic growth of an average 7.3%1 in 2018-2022 would indicate the country's growth story shows no signs of slowing down.

We see the Indian economy able to shake off the negative effects of the recent global equity selloff, the Goods and Services Tax (GST), introduced in 2017 and the demonetisation in late 2016. These developments had temporarily affected cash-intensive industries and supply chains-especially with small traders supplying to larger manufacturing companies-as they found it difficult to meet the paperwork required.

As we see these effects likely wearing off, we think there is more room for Indian equities to potentially appreciate. Despite some outflows from the global equity selloff and the Punjab National Bank (PNB) scandal, we believe India's favourable demographic backdrop could lead to more growth in the equity market, particularly in large-cap stocks.

Homegrown Factors

Domestic demand now accounts for the largest proportion of the Indian economy and is driven by the burgeoning middle-class population.

It's not the first time we've noted the rise of the middle-class, and it won't be the last-the population expansion is only in its initial stages and some estimates projected it to double in size within

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Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,300 investment professionals, and offices in major financial markets around the world, the California-based company has over 75 years of investment experience and over $1.4 trillion in assets under management as of June 30, 2023. For more information, please visit franklintempleton.com and follow us on LinkedIn, Twitter and Facebook.

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Comments (1)

felix_nuno profile picture
Spot on.
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