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Amazon has a "substantial" opportunity in India despite the country's recent regulatory changes that target e-commerce sites, according to one bank.

"While recent regulatory changes in India pose a material near-term P&L setback for Amazon, we still view the India market opportunity as substantial and only incrementally less attractive long term," said RBC analysts led by Mark Mahaney in a note distributed on Friday.

Under India's new regulations on foreign e-commerce businesses, which started on February 1, foreign e-commerce sites like Amazon are banned from making deals to exclusively sell merchants' goods and have restrictions on the amount of discounts and cash back they can offer.

While the new rules add headwinds for Amazon's business in India, the tech giant's sizable presence in the country will still help it capitalize on huge opportunities, according to Mahaney.

India has a $600 billion retail market, which ranks third in the Asia-Pacific region after China ($2.5 trillion) and Japan ($1 trillion), by RBC's calculation. The size of country's e-commerce market was $32.7 billion in 2018, less than 5% of its total retail market, and is likely to grow to $82 billion by 2022 due to the rising rate of smartphone adoption, a rapidly growing middle class, the influence of its young population, and growing penetration of e-commerce players like Amazon, Mahaney said.

Amazon launched its India marketplace in June 2013. It has since invested more than $5 billion there as it locks horns with the Walmart-owned Flipkart for the top spot in India's online retail market.

Amazon generated $9 billion in gross merchandise volumes and $5 billion in revenue in India last year, Mahaney said. He added the company's India revenue would decline by 60% to $2 billion in 2019 due to new regulations. The RBC team has an "outperform" rating and $2,300 price target — 41% above where shares were trading Monday. Amazon was up 9% so far this year. Now read: Amazon is trying to expand its reach in India's soon-to-be $200 billion e-commerce market