Emerging markets managers have welcomed Saturday’s business-friendly Indian budget which markets reacted positively to.
India’s finance minister Arun Jaitley announced the country’s latest budget at the weekend and promised a range of proposals, from a massive cut in corporation tax to significant infrastructure spending, designed to improve India’s business landscape.
Investors were initially unsure how to react to the proposals, as the Indian Sensex index fluctuated between positive and negative on Saturday. The market was opened on the day because of the budget.
But the index ended the session 0.5 per cent higher and continued to rise today, though the index is still not back to the high seen at the end of January.
Emerging market managers expressed support for the policy reforms, though they acknowledged that many observers had hoped for more radical reforms.
Mike Sell, head of Asia at Alquity Investment Management, said while the budget “was never going to make everyone happy” Mr Jaitley had “delivered a pro-growth budget which reinforces our strongly positive view on the Indian economy and stock market”.
Mr Sell picked the cut in corporation tax of 5 percentage points, a 25 per cent reduction, and the simplification of India’s morass of local taxes into countrywide goods and services tax in April 2016, as the major highlights.
Kunal Desai, head of Indian equities at Neptune Investment Management, highlighted the budget’s combination of a 30 per cent increase in road and rail infrastructure spending combined with a cut in “unproductive subsidies”.
Mr Desai acknowledged that some “may be initially disappointed that bolder steps were not taken” but said more radical reforms could have damaged the political capital of prime minister Narendra Modi and his Bharatiya Janata party.
But Mr Jaitley has reassured investors that further reforms will be phased in throughout the tenure of the government and Mr Sell said the budget had “reaffirmed and further enhanced our extremely positive view on the Indian investment case”.