We don't see any particular reason for underperformance of India, Young said, adding they do keep a watch on energy prices due to India's dependence on crude imports
The key driver to the current rally that has seen benchmark indices hitting their life highs is foreign institutional investors who have pumped nearly Rs 65,000 crore in Indian equities since February. Meanwhile, the domestic institutional investors have remained net sellers during the same period.
"FIIs are working with the base case scenario of Narendra Modi coming back as Prime Minister again," said Hugh Young of Aberdeen Standard Investments who thinks there is room to increase exposure to India.
Aberdeen Standard Investments has an overweight position in India for 25 years.
In an interview to CNBC-TV18, he said the implementation of policies post elections is the most important factor and the key thing is to have a government that implements all those policies.
Opinion polls still indicated that BJP-led National Democratic Alliance is expected to get at least 240-260 seats in general elections 2019, which is closer to half-way mark that it needs to form the government.
"We don't see any particular reason for underperformance of India," Young said, adding they do keep a watch on energy prices due to India's dependence on crude imports.
In last four months, crude oil prices increased a whopping 50 percent from December lows around $50 a barrel amid Iran sanctions. Currently, Brent crude futures, the international benchmark for oil prices, traded over its five-month high of $74 a barrel.
Oil is the key part of our import bill as India imports more than 80 percent of the requirement. So any increase in crude prices directly hits the trade deficit of the country.
Consumption growth has been a concern, Young said. Consumption has slowed down for the last several months amid liquidity crisis that hit in September.
Banking & financials segment is the key driver in the current rally on hope of easing asset quality concerns and strong credit growth ahead."ICICI Bank had a wobbly time but has picked up recently," Young said, adding one of the issues in the FMCG space is that they are expensive.
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