Can India truly deliver on the promise of the best demographic and consumer growth story in the world? India is the BRIC country without any other members.  India is delivering “China like” growth and has been one the best performing major EMs in the last 12 months (+36%).

Tomorrow Finance Minster Arun Arun_Jaitley_at_the_India_Economic_Summit_2010_croppedwill deliver his first budget under the PM Modi government which will target growth of 8.1% to 8.5%.  This will be an upshift for the economy and make India (EPI, quote) the world’s fastest growing major economy.  India is benefitting from the global deflationary forces that are bringing down nagging and persistent inflation issues.  There is a window for big reform and the market may be pricing in a lot of great news.  We think two things can happen:

  •  Arun can articulate realistic spending targets that will inspire investment and a belief India has made progress in overcoming potentially the world’s most bureaucratic government.
  • The market can be disappointment and not get enough after a big run up in the markets in anticipation of this budget announcement

India is far from under owned and I worry if this isnt a sell the news event tomorrow.  Construction stocks, industrial names and even housing stocks have been outperforming and the index was +1.65% last night on the eve of the event.   The Rupee is offering significant upside relative to other EM currencies and may be part of the medium term continued outperformance.  showing the largest positive risk-adjusted return in FX as it is stronger relative to all G10 currencies.

Below see the chart that puts India in a relative performance context since the markets bottomed in mid-December. 

India +9.3% since December 16th.  In that time it has outperformed the SPX by 737bps and the EEM by 498 bps…


We remain long blue chip banks (HDB, quote), (IBN, quote), and industrial ADR play Tata Motors, (TTM, quote).

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