Super-Rich Tax, Earnings Slowdown Weighing On Indian Markets, Says TCG Asset Management

Foreign investors spooked by the “super-rich” tax and waning earnings growth of Indian companies are impacting the nation’s equities, according to Chakri Lokapriya, managing director of TCG Asset Management.

“India’s problems are its own creation,” Lokapriya told BloombergQuint in an interview. “If you’re telling foreign portfolio investors we’re going to take away (as taxes) roughly half of your returns, then that makes India’s returns less attractive than developed markets.”

That comes as foreign investors have dumped Rs 11,369-crore worth equities so far this year, according to data on National Securities Depository Limited’s website—the highest monthly sell-off this year. In addition, Finance Minister Nirmala Sitharaman announced a surcharge on those earning over Rs 2 crore annually in her maiden Budget earlier this month.

TCG Asset Management estimates earnings growth for 2019-20 to slow by nearly 7 percent to 13-15 percent. The earnings cycle needs to “flip around” with policy support, Lokapriya said, adding that such a turnaround is unlikely at least in the next two quarters.

Stocks of information technology firms and select pharma firms with no regulatory woes were his preferred bets in the current market conditions. A strong U.S. GDP growth and the current corporate earnings season will aid these two sectors, Lokapriya said.

Watch the full interview: