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Indian stock market volatility masks investment opportunities, says JPMAM

Current stock market activity in India is not reflecting the investment opportunities in the region, says JPMorgan Indian Investment Trust manager Ted Pulling.

Speaking at a recent web conference the lead manager told investors: “India is currently in an excellent earnings environment and is the second strongest growing economy after China. GDP is currently around 8.8 per cent and, whilst we do expect a deceleration in the short term, future economic growth will be sustained at 7.5 per cent to 9 per cent over the longer term.”

Pulling blamed ailing investor sentiment and a weaker rupee for the slowing Indian stock market. However, he expects the exchange rate to stabilise and is confident that the region has the reserves to ensure that it is not a long term issue.

The trust manager identifies infrastructure, investment and urbanisation as three key areas for growth and as such top sector holdings in the portfolio include energy, financials, industrials and information technology.

He says: “We already know that urbanisation has led to an increase in consumption. At present 30 per cent of India’s population lives in cities, but we expect this number to increase by around 5 per cent over the next decade. This large population shift will lead to greater demand for consumables.”

Despite opportunities for long-term growth in India, Pulling warns that policy uncertainties in the forthcoming 2008-2009 election and rising inflation worsened by government subsidised oil prices could impact the markets in the short term. India’s trade deficit, high interest rates and elevated commodity prices are also impacting the stock market according to the manager.

Looking ahead, Pulling says: “It could be a long summer, but we will continue to see corporates making a profit even though stock markets will continue to be volatile. Going into 2009 I think the stock market will look much better while the economic slow down will run its course and consumption will improve, which will result in a reacceleration of growth in the region.”

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