Indian Stocks to Make a Comeback as Banking Crisis Passes, AMP Says

(Bloomberg) -- 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 a lot of investors, even those that had valuation concerns.”

Naeimi's funds went from having no exposure to Indian stocks to boosting it to 5% of assets after Narendra Modi delivered a Donald Trump-styled cut in corporate taxes on Sept. 20. He is looking to buy more.

READ: India's Shadow Banking Crisis Tests Stock Bulls' Faith in Rally

AMP Capital is sticking to its bullish stance despite the market's 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% in the next two years. The gauge dropped 0.4% 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.

To contact the reporter on this story: Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Naoto Hosoda, Cecile Vannucci

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