Indian Headaches
Over the past eighteen months Indian equities have fallen the best part of 20%. That compares to a near 25% advance in the Asia ex Japan regional index. With hindsight, valuations were at somewhat rarified levels and when revenues and earnings growth slowed last year the market slowly but surely lost its way.
The all-important software sector has played an important role in this decline with the arrival of AI arguably threatening to upend the traditional business model of the sector.
The conflict in the Middle East could not have come at a worse moment. The region takes one sixth of India’s exports and accounts for well over one third of foreign workers remittances. The Middle East also accounts for over half of Indian’s oil imports.
While green initiatives have been proliferating in the country over the last few years, India remains a long way behind China where solar and wind (coupled with the ESS rollout) account for roughly half of China’s electricity needs.
Portfolio holding Larsen & Toubro, which had been a solid performer for us, has fallen sharply since the outbreak of hostilities. The Middle East accounts for one third of their revenues and order book.
Sometimes when it rains, it pours.
The longer term outlook for Indian equities remains positive
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