India fund managers are pinning their hopes on a win for the opposition Bharatiya Janata Party (BJP) in the country’s election, which began last week.
The managers are hoping that the election – which began on April 7 – will usher in a new era of investment and economic progress for a country beleaguered by political inertia and the ruling Congress party’s inability to push through much-needed reforms.
“India’s problems have been that it has been in the throws of a minority coalition government,” said Avinash Vazirani, manager of the £173m Jupiter India fund.
“As a result it has been unable to really pass anything because it has been constantly embroiled in politicking. The establishment of a stable government from an investor perspective would be good news.”
The manager said the BJP, led by Narendra Modi, was more likely to enact the reforms to boost infrastructure spending and reduce the economy’s reliance on subsidies.
Mr Vazirani added: “People want change, and if they come out in large numbers the BJP is likely to get a large numbers of seats, and the party has a good track record of getting building and infrastructure projects started-up.
“If we see a stable government in India, investors could see the market gain some legs. The potential changes have not yet been priced in, and investors could make a lot of money.”
Such an outcome would be of relief to investors who have seen the Indian market collapse in recent years. In the three years to April 7, the MSCI India index has dropped by 17 per cent, according to FE Analytics. But investor sentiment has improved this year and the MSCI India index is up by 7 per cent in 2014.
Ajay Argal, manager of the $13.4m (£8m) Baring India fund, said this year’s market gains were down to the expectation of a BJP win.
“Expectations are edging higher that the pro-business BJP may come in as the big winners when voters head to the ballot box over April and May,” the manager said. “Recent polls show rising support for the BJP.”
Mr Argal added: “We expect business activity to strengthen in 2014, but we foresee this happening during the latter part of the year after a new government is formed.”
Neptune’s Kunal Desai, who runs the firm’s £20.1m India fund, highlighted the defence and financials sectors as likely to benefit from a BJP win.
He also predicted that the BJP would boost exporting companies by opening up special economic zones and introducing tax breaks.
Mr Desai said: “We’ve been anticipating a pre-election rally and increased financials through buying private banks, which are well run, are well capitalised, and whose risk management has improved.”
In an interview with an Indian news agency, Franklin Templeton’s veteran emerging markets investor Mark Mobius predicted annualised returns of “15-20 per cent”, but expressed concern about the BJP’s negative stance on foreign direct investment.
