India stock market awaits catalysts

INDIA is among the worst-performing markets this year. Year to date, as at Oct 28, the Sensex index only managed to deliver total returns of 1.4 per cent in Singapore dollar terms, trailing many global indices including the Kospi (58.5 per cent), MSCI China (35.4 per cent), and the Straits Times Index (21.5 per cent). This significant underperformance can be attributed to the following factors:

IT sector headwinds

India’s IT sector, which derives over half of its revenue from the US, has suffered from a cutback in discretionary IT spending by American firms amid an uncertain economic outlook. Adding to the pressure, US President Donald Trump recently implemented a one-time US$100,000 fee on new H-1B visa applications for skilled foreign workers, many of whom are employed by Indian outsourcing firms. In the near term, the growth and profit margins of these IT firms could face pressure, as contracts with US clients may need to be renegotiated to reflect higher manpower costs resulting from increased visa fees.