Iran war’s end will be turning point for India, Amundi arm says

Amundi SA’s research arm sees scope for a rebound in Indian equities after a steep selloff fueled by high oil prices and persistent foreign outflows.

An end to the Iran war may prove a turning point for India given its reliance on oil imports, Alessia Berardi, head of global macroeconomics and emerging markets strategy at Amundi Investment Institute, said in an interview in Mumbai last week. “I’m quite positive,” she added, citing improving private investment and other economic data.

Berardi’s optimism follows a bruising year for Indian equities. The benchmark NSE Nifty 50 Index has fallen nearly 14%, among Asia’s worst performers, as subdued earnings growth and more than $30 billion of foreign outflows weighed on shares and the rupee.

For global investors, an end to the Middle East conflict may be a “tipping point,” Berardi said. The US-Iran war has pressured oil-dependent economies such as India since late February, with disruptions to supplies through the Strait of Hormuz driving up crude prices and inflation.

Berardi favors companies tied to India’s defense and manufacturing sectors, which have rallied sharply this year. An index of defense stocks has gained more than 16%, outperforming global peers as the country ramps up domestic equipment production.

India’s central bank this month upgraded its fiscal year growth forecast to 7.1%, from 6.7% previously. The economy expanded 7.8% in the June quarter as domestic demand remained resilient.

“If you look at the equity market, you have this pessimistic perception on India, but I’m more in the other camp right now,” Berardi said. “I’m seeing the seeds of a good economic performance.”
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