This extract has been taken from JP Morgan's "Market Insights" and has been written by Ian Hui, Associate, Global Market Strategist, Anthony Tsoi, Market Analyst, and Tai Hui, MD, Chief Market Strategist Asia. To view the entire report, click here.
It has now been over a year since Prime Minister Narendra Modi and the Bharatiya Janata Party (BJP) came to power in India.
As an update to our January white paper: “India and Mr. Modi: After the Honeymoon,” we review the progress that the government has made so far.
As we previously wrote, while our general view of his performance so far has been one that has met or exceeded expectations, much will depend on the pace at which Mr. Modi can implement his reform agenda and how his policies begin to have an impact over the medium term.
For equity investors, the key near-term issue will still be how long it will take before corporate profits and margins start to respond to the improving economy.
From market reaction year-to-date, anticipation for the rate of reforms and an improvement in earnings has most likely been initially overly positive.
Reforms have neither been as bold nor as fast for investors, earnings have disappointed and the economy has yet to take off as hoped. As a result, the India market has seen relatively disappointing performance in comparison to 2014.
Our own view has been, and still is, that Mr. Modi is taking a long-term view of dealing with India’s structural problems. Reforms are expected to happen at a steady pace with mainly incremental changes to India’s operation, given that he has at least one five year term. The past year has seen a number of initiatives take place; we consider most of these having turned out more successful than not, but there have been some letdowns. We will go over the major ones.
What has been successful so far?
What could have gone better?
Investment implications
