Next year the country will finally see evidence of the long-awaited capital spending cycle and the government led by Prime Minister Narendra Modi is likely to be re-elected in the 2019 general election, said Christopher Wood, Global Equity Strategist at CLSA.
"The Indian stock market has been resilient despite weak earnings... So right now I will be looking to increase my overweight in India early next year if I get more confident that the capital expenditure cycle is returning and my base case on the politics is that the Modi government will be re-elected with a reduced majority,” Wood said.
The biggest risks for India right now are external that is further appreciation in oil and the dollar, he said, adding that there was some relief from oil but this correction is attributed to the U-turn from the US on the Iranian oil issue.
On US-China trade war, Wood said, either both the countries will reach an agreement by year-end or there won't be a deal.
If they failed to reach an agreement, it will become very negative because then there will be a big increase in tariffs and there are fewer chances that China will sign a deal with the US, Wood added.