India: US-India tensions a chance to add to long equity exposure

The macro backdrop in India remains favorable, so we view the latest equity sell-off there as a buying opportunity. We re-iterate our bullish thesis from February and maintain our long equity exposure.

The growth outlook for India is still exceptionally strong, with our 6-month forward estimate for GDP near 7%.

On the inflation front, our LEI continues to edge lower while food inflation and consumer inflation expectations hit new post-Covid lows. Falling inflation is one factor that will keep the RBI biased towards easing.

This macro “sweet spot” (strong growth, low inflation) favors  continued equity gains.

We aren’t reading too much into the tension between the US and India, particularly over the purchase of Russian oil. Even if India loses access to discounted Russian oil, the decline in global oil prices will still be a moderate tailwind to Indian corporate profits.

Our Tactical Outlook model triggered a buy signal earlier this month as the index tested its 1-year trailing VWAP. We re-affirm our long allocation to Indian equities.