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India’s Economy: Beyond Modi

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India’s Economy: Beyond Modi Empty India’s Economy: Beyond Modi

Post by confuzzled dude Tue Jul 14, 2015 3:37 pm

Whether investors choose to focus on the macro or the micro, the big question now is whether the strong Modi-driven rally has meant they’ve missed the opportunity to invest. After all, at first glance, India appears to be a relatively expensive market. The MSCI India index traded on a price/earnings ratio of 19.83 at the end of May 2015, and a price/book ratio of 3.2. The figure for the MSCI Emerging Markets index was 14.5 and 1.59, respectively. This may seem to give weight to the idea that optimism about the Modi government has pushed up valuations to a point where the performance of the market will be highly dependent on whether they will deliver. As we’ve seen, there is reason to be cautious about whether this will happen, suggesting that the market may be vulnerable to disappointment.

However, India has generally been a relatively expensive market compared to the rest of the emerging universe. This reflects the higher quality of the India corporate sector as a whole. What’s more, in our view, the market is becoming increasingly selective on valuations: good companies have been rewarded with stronger valuations, while weaker ones have been derated.

In our view, successful investing in this market is not about following the political or economic twist and turns—it’s about discovering growing companies across the market cap spectrum that can thrive. For patient, long-term investors, India still represents an attractive investment opportunity.
http://www.thinkadvisor.com/2015/07/14/indias-economy-beyond-modi

confuzzled dude

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