BNY Mellon Investment Manager Sees Stocks Priced for Negative Scenarios
NEW YORK and LONDON, August 8, 2013 — Accelerating infrastructure investments, favorable demographics, and progress on economic reform could drive higher returns for Indian equities for years, according to a white paper from The Boston Company Asset Management, LLC, the Boston-based global equity investor for BNY Mellon.
The paper, Uncovering Opportunities in Indian Equities, notes current valuations appear to discount any type of economic or earnings recovery.
The factors that could drive Indian growth have been overshadowed by investors' concerns over negative issues such as the country's fragmented government, power outages, poor roads and deteriorating margins in many business sectors, according to the report.
"The noise surrounding India's current economic flaws could cause investors to miss the key advantages that the country possesses as well as its bright future prospects," said Andrea M. Clark, CFA, author of the report and portfolio strategist for The Boston Company. "Most importantly, India boasts a large working-age population that will drive expansion through personal consumption. Unlike China and many developed nations, India is not grappling with an aging population that will need substantial societal support."
Additional potential drivers of economic expansion noted in the report include:
- Urbanization, which could significantly boost housing and transportation;
- Improving rural wages, helped by investments in infrastructure and mobile communications;
- Cooperation among various parties in India's coalition government to pass reforms needed to improve the economy; and
- Potential trade agreements to improve exports.
Another factor for investors to consider, according to the report, is the approaching national election in 2014. While elections often cause investors to become cautious, the parties in India's coalition government appear to be working together to pass necessary reforms.
"India's gross domestic product is at a five-year low, but the country appears poised for a rebound," said Clark. "Considering the government's agenda for reform, Indian equities have become increasingly attractive for the long-term investor."
The Boston Company Asset Management, LLC, a BNY Mellon Investment Management boutique, provides investment management services for corporate, public, mutual funds and union sponsored and jointly trusteed retirement plans, endowments and foundations. Assets are managed by The Boston Company as well as its personnel acting as dual officers of either The Dreyfus Corporation or The Bank of New York Mellon.
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