Why Canadians investors should watch the Indian elections

Opportunities, risks and what you need to know as the world's second-most populous country heads into elections

Ruth Saldanha 1 April, 2019 | 2:00PM

 

 


Ruth Saldanha: As India heads into its general election next month, what should Canadian investors keep an eye on? Vikas Gautam the CEO of Aditya Birla Sun Life Asset Management is here with us to talk about it.

Vikas, thank you so much for joining us here today.

Vikas Gautam: Thanks, pleasure being here.

Saldanha: With the elections coming up next month there is some fear that investors should right now stay and hold, rather than invest in right away. How are you reading the upcoming elections at the moment?

Gautam: So when you look at what's happening in India at this particular point of time, though investors were trying to shy away till the whole of 2018 and in the beginning of January 2019 as well. But with the way things have panned out over last February and March, we see a lot of interest coming in from foreign investors especially from Canadian large institutional clients who are investing back into India. And just to share with you some numbers February standalone saw an inflow of $2.5 billion and March as of yesterday almost $4 billion plus have been invested into the Indian market through FPI. So, what I would like to recommend to Canadian investors is whenever there is a dislocation in the market or a fear psychosis that’s the best opportunity to take part into. And the way elections are placed it's one political party, one leadership as against bunch of other parties and bunch of other leaders who are trying to come together. But we're pretty hopeful that there may be a fair bit of chance for the current leadership to be back in India to take India to its deserving leadership position.

Saldanha: There is a lot that has been spoken about in terms of the opportunities of India. With the elections coming up what are some of the risks that you see?

Gautam: So there are two risks that we see at this particular point of time. One is that if there is a large coalition government that comes into power, that could derail the pace of growth, but not beyond a couple of quarters. Because with the base foundation which has been laid, whosoever comes back into power will not only have to take these reforms forward but at the same time will also have to work upon new reforms. But it can definitely derail the pace for three to six months. On top of it, the other domestic risk that we see is geopolitical, what we have witnessed in the past, we've witnessed in the recent past. If there is some kind of blow up that happens on that front that could create some kind of volatility.

Saldanha: Finally heading into the elections what are some of the sectors that you like.

Gautam: So we as a house, we believe in the domestic secular growth story of India and that’s how we position our portfolio. So we are overweight financials, we are overweight consumer durables. We're overweight real estate, industrials, and materials.

Saldanha: Thank you so much for joining us.

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Ruth Saldanha  Ruth Saldanha is Senior Editor at Morningstar.ca