At the same time, all eyes are on the goods and services tax (GST) decision, which Neto calls the next big trigger for investors. A meaningful cut, for example, from 25% to 15%, could significantly boost consumption-led sectors such as autos and packaged foods. However, he cautioned that such a move may hurt capex-sensitive companies by tightening fiscal space, creating a divergence between consumption winners and investment laggards.
He stated that domestic consumption trends are improving, with August data showing a pick-up and Q2 gross domestic product (GDP) surprisingly strong, though he cautioned that these numbers should be taken “with a pinch of salt.”
On performance, Neto highlighted that MSCI India has underperformed MSCI Emerging Markets over the past year but remains a long-term outperformer. Global investor focus, however, is currently shifting toward China’s rally, which is dominating flows across Asia. “China is the hot topic of the summer,” he said, while India is in wait mode.
Also Read: Global firms can’t ignore India’s middle class boom, says Milken Institute economist
Neto expects India to catch up within the next 12 months, though in the short term, the sustainability of China’s rally will remain the key driver of regional sentiment.
For the entire interview, watch the accompanying video
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