India Union Budget 2019: Foreign investors looking for growth stories may find comfort in India, as the domestic investment growth cycle is starting to pick up. Global investment banking giant Goldman Sachs is bullish on India, with a target of 12,900 points on the benchmark NSE Nifty 50 index, Caesar Maasry, head of emerging markets cross-asset research and managing director, Goldman Sachs said in an interaction with CNBC TV18. Moreover, India’s fiscal balance — one of the hot topics in local economic discourse — is not as worrisome as compared with the other emerging markets which have their fiscal deficits in the range of 5-7 per cent. In fact, Caesar Maasry even said that widening of the budget deficit to 3.6 per cent from 3.4 per cent would not make much of a difference.
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The budget story is a shorter-term issue that foreign investors tend to focus on as a catalyst. India has a fairly strong trajectory, so the month-to-month developments on the fiscal side of things are not that worrisome, he said. “I don’t think there is a particularly worrisome fiscal balance in India. Certainly, if you compare it to emerging market peers it is much more about the domestic growth investment cycle. I think it is starting to pick up in India. Lower taxes sometimes give the allure of growth picking up,” Maasry said to CNBC TV18.
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Growth outlook has been weak across the board and India has been relatively been defensive in that area. Massry has pretty positive expectations about India over the next few quarters. Speaking about the foreign inflows in India, Massry said India has not seen a fair amount of foreign inflow in India as the foreign investors are fixated on the big shifts in the US fixed income market. With rates coming down quite aggressively India will benefit from some fixed income flows in the second half.
“We do like five-year bonds in India. I think you are fair to say that you have not seen a fair amount of foreign inflow. I think foreign investors have been very fixated on the big shifts in the US fixed income market with rates coming down quite aggressively and you have seen flows in other high yielders in emerging markets. India will benefit from the fixed income flows as India progresses into the second half of the year,” Massry further said.
There is a further scope for the Reserve Bank of India to cut interest rate by 25 basis points this year. Massry said the cash curve in India is fairly steep and that’s where the investors will look for in terms of buying bonds. India’s bond market also looks attractive and that’s where the RBI can cut again.With regard to escalating trade tensions between the US and China, Massry doesn’t see India as a beneficiary of weakness in China. India has a strong domestic demand story market and that is the real reason to be bullish on the assets.