On November 8, 2016, the day of the U.S. election, India announced the demonetization of all 500 rupee (roughly $7.40) and 1,000 rupee (roughly $15) banknotes of the Mahatma Gandhi Series. This represented 85% of the currency in circulation in India, and presented a tremendous shock to a market in which 70% of transactions are cash.

However, in our view, the long-term benefits of this measure outweigh the near-term setbacks. The $2 trillion of demonetized currency that re-entered the banking system resulted in an increase of total system deposits and led to an improvement in the future fiscal balance and a broadening of the tax net to include a large share of the black economy.

In addition, a majority of companies beat expectations on both top and bottom lines during the most recent reporting season, indicating that the actual impact of the currency demonetization was smaller than feared.

In our view, India continues to offer attractive investment opportunities. It has the best demographics among emerging markets, with a working-age population ratio expected to peak in 2030 (compared with 2010 in China, 2008 in Russia, and 2020 in Brazil). It has a supportive macro backdrop, with declining inflation and interest rates. And, it has a reform-minded government focused on improving the ease of doing business.

Indeed, Prime Minister Narendra Modi has been delivering on this reform agenda, with even more to come, and the market has responded to the passage of new legislation. The goods and services tax (GST) is the latest and most important, and rollout will not even begin until this summer.

The chart below shows the change in the NIFTY 50 Index (NIFTY), which tracks the performance of Indian equities.

RELATED POSTS

SUBSCRIBE NOW

Gain insights on macro market events, the economy, and investing strategies.
Receive our latest blog posts to your Inbox. Stay up to date and subscribe now.

SIGN UP

FOLLOW US

twitterfooteryoutubefooterfacebookfooter

RSS FEED

Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
Cookie Policy | Social Media Disclaimer | Privacy & Security | FINRA’s BrokerCheck

FOLLOW US

twitterfooteryoutubefooterfacebookfooter

RSS FEED

Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
Cookie Policy | Social Media Disclaimer | Privacy & Security | FINRA’s BrokerCheck

Subscribe Now

Gain insights on macro market events, the economy, and investing strategies.
Receive our latest blog posts in your Inbox. Stay up to date and subscribe now.

SIGN UP

Send this to friend