- Valuation: relative to history, India equities are attractive compared with large EM peers, particularly in Technology
- Reform: agriculture laws show Modi is willing to use mandate for needed economic reforms, not just divisive social ones
- Risks are reform resistance (eg farmers protest), fiscal control, higher military spend, aggressive earnings expectation
Relative to large EM peers, after Technology broadly, India is our top country pick because it offers a combination of value, growth, low currency risk and credible policy, albeit it is a shadow of the 'incredible India' of the past decade.
Within the Technology part of large EM, India Tech and Korea-Taiwan Tech Hardware offer more value relative to history than China Tech Apps. The agriculture laws demonstrate that Prime Minister Modi is willing to use his political mandate for much-needed structural economic reform, rather than divisive social reform.
However, the farmers' protest (and subsequent Supreme Court suspension of the laws) show the effective resistance of vested interests to such reforms and is a concerning precedent for the long 'to do' list that remains.
In addition to the risk of resistance to needed reforms (or the prioritisation of divisive ideology), there is the need for a return to fiscal control post-Covid-19, potentially higher military spend in the growing friction with China and very aggressive consensus expectations on earnings growth.
For Tellimer Insights Pro subscribers (Contact Us to learn more), we present seven charts to mark India's 72nd Republic Day on 26 January and summarise the equity investment case.
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