In short, Indian stocks look relatively expensive and despite investor expectations, it’s too soon to tell whether the government will be able to deliver on promised reforms, which have yet to be executed. Even more importantly, a majority market-friendly government is no guarantee of post-election stock outperformance. The latter depends on the speed of policy delivery and other external factors, and already Indian stocks appear to be giving up some of their election-related gains.
As such, I’m advocating that investors stick with a benchmark weight to India. While there are reasons for optimism, current valuations seem to already reflect a lot of good news.
Sources: BlackRock, Bloomberg, I/B/E/S
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
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