This post was just published on ZYX Global Multi Asset Allocation Alert.
Unlike the United States, annual budget in India of the central government (equivalent of the federal government in the United States) is one of the most important events that influences the Indian stock market. The budget just presented was mostly as expected. It lays out the ground work for producing a strong macro economic environment and also to implement further reforms. There was fear, especially among foreign investors in the Indian market that the budget would increase long-term capital gains tax. This speculation was due to a statement buy Prime Minister Modi that those making profits from the markets must contribute to nation building. The statement was later clarified by the finance minister.
Indian stock market responded positively to the budget. Sensex, a popular index of Indian stocks was up more than 300 points at one time after losing 226 points in the two days preceding the budget. Indian currency rupee has strengthened.
Some among foreign investors are speculating that this is a relief rally and may not last. We beg to differ. We cannot predict day to day volatility but our analysis is that the budget is long-term positive.
ETF of choice remains EPI. The buy zone remains $18 to $20.81.
We are increasing our allocation to India from current 3% to 5% in both portfolios in ZYX Global Multi Asset Allocation Alert.
In ZYX Emerging Markets ETF Alert, we are raising our short-term rating of India from Neutral to Mild Buy; medium-term rating remains Buy and long-term rating remains Strong Buy.
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