Invesco: Recent pullbacks may be a good opportunity to "buy on the dip" for Indian stocks

According to the Zhitong Finance APP, Zhao Yaoting, Global Market Strategist for Invesco in the Asia-Pacific region (excluding Japan), stated that since the outbreak of the pandemic, the Indian stock market has been in a continuous bull market. However, affected by cyclical slowdowns, the stock market fell about 9% from its historical highs last month, followed by a rebound. The recent pullback may present a good opportunity for "buying the dip" and purchasing certain Indian stocks.

As of the quarter ending in November, India's GDP has slowed, with a real year-on-year growth of 5.4%, far below expectations (estimated at 6.5%, down from 6.7% in the previous quarter). Zhao Yaoting believes that the current economic slowdown and some negative news regarding India's largest conglomerate may be reasons for foreign capital outflows. However, the Indian stock market still shows resilience, with domestic inflows from mutual funds offsetting about half of the foreign outflows.

Zhao Yaoting stated that the current slowdown should be cyclical, a normal phenomenon that occurs in almost every major economy. Manufacturing and domestic consumption growth have weakened successively, but seasonal factors in this quarter and the next are expected to drive data improvement. Private consumption accounts for about 60% of India's GDP, which means that for a recovery to occur, Indian consumers need to "open their wallets." Signs of recovery have already been observed. The festive season has begun, extreme weather has ended, and with agricultural production growth in the last quarter, these factors should collectively boost rural consumption.

In addition, the controversial elections have concluded, and the Indian government is focused on getting growth back on track, with expectations of expanding infrastructure stimulus in the coming months. The boost in domestic demand, coupled with increased government spending and the imminent interest rate cuts by the Reserve Bank of India, may drive growth in private sector spending and attract the attention of foreign investors.

He emphasized that given the high inflation, the Reserve Bank of India is likely to keep the policy rate unchanged at its December meeting. The current cyclical slowdown in the domestic economy will undoubtedly benefit from the Reserve Bank of India's interest rate cuts. Invesco will closely monitor any legal developments between the U.S. Department of Justice and Indian corporate entities. So far, local investors have largely shaken off the impact of these events, and the risk of scandal spreading is low.

He believes that although investors may perceive that India's macroeconomy is on a downward trend for various reasons, the economy and the market have not exited. Stimulated by government investment and improvements in domestic consumption, growth is expected to accelerate in the coming quarters. The adverse factors facing the market and the economy are diminishing, which may present a good opportunity for foreign investors who have been waiting on the sidelines due to the high valuations of Indian stocks to "buy the dip" and purchase certain Indian stocks. Additionally, December has historically been favorable for the Indian stock market; over the past 30 years, the Nifty index has recorded gains in nearly three-quarters of the time, averaging a 3% increase compared to the previous month