Even as Indian stock markets have turned more expensive than historical averages and other emerging-market peers, Manulife Investment Management's Rana Gupta still sees opportunities.
While valuations at the headline level are at “fairly high levels”, it's a series of factors that have brought them there, said the Singapore-based managing director (India equities) at Manulife Investment Management, which manages assets worth about $675 billion.
The country has seen certain structural reforms since 2014-15 in the form of the goods and services tax that started “formalising the economy”, and then the advent of 4G that created a digital economy, Gupta told BloombergQuint's Niraj Shah in an interview. “That has driven productivity on the one hand and the government's tax collection on the other. We now see how much indirect tax collection has grown despite the Covid situation. This has addressed the fiscal situation.”
“I can't recollect the last time when India's tax collection was ahead and expenditure was lower,” Gupta said.
Policymakers, according to him, have also started addressing domestic manufacturing through duty hikes, tax cuts, and production-linked incentives. That's leading to a rise in exports and cut in imports.
As deficits fall, savings rise, productivity improves and inflation is at an acceptable 6%, India is set for long-term sustainable growth, which will drive earnings, he said
According to Gupta, valuations have turned expensive for consumer discretionary and certain information technology stocks. “Domestic cyclicals, which are supposed to benefit out of a more robust economy, such as banks, capital goods, autos, financials, are not that expensive. They're in fact reasonably valued.”
There are “enough number of opportunities” in the digital economy, he said. Auto-engineering goods, chemicals and electrical, and electronics stocks, too, look “very promising” as India has seen an uptick in queries from around the world in these sectors.
Watch the full interview here:
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