We maintain our long-term positive bias on India. The stress in the shadow bank sector will eventually blow over and Prime Minister Modi still has a lot of political capital to push reform. However, while we previously sought to buy on dips, these dips now have to be deeper to entice us.
The manufacturing mini-cycle downturn might be about to end, with the current industrial recession out of sync with the fundamental anchors of retail sales and financial stress. History suggests the manufacturing sector tends to overshoot but will eventually be dragged back up.