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CLSA sees ‘greatest hope’ for Indian stock markets in Narendra Modi - The Economic Times on Mobile
CLSA sees ‘greatest hope’ for Indian stock markets in Narendra Modi
26 Aug, 2013, 1240 hrs IST
Chris said, “the Indian stock market’s greatest hope is the emergence of Gujarat CM Narendra Modi as the BJP’s prime ministerial candidate.”
A decision to go to the IMF would appear to be political suicide for the current Congress-led government, says Christopher Wood of CLSA, in his weekly GREED& fear.
Listing a number of negatives for the Indian stock markets, Chris Wood of CLSA says: "the Indian stock market's greatest hope is the emergence of Gujarat Chief Minister Narendra Modi as the BJP's prime ministerial candidate."
In his weekly GREED & fear, Chris says the one potential positive amid all the negatives that the country is witnessing is that the gathering macroeconomic crisis could trigger an improvement in governance. "In this respect, it hardly inspires confidence that Congress leader Sonia Gandhi appeared in Parliament talking up her expensive food security bill," he says.
Chris adds, "even as the odds are definitely stacked against him (Modi), the view is simply that the worse the sense of crisis the better Modi's chance of winning. This is why a decision to go to the IMF would appear to be political suicide for the current Congress-led government."
Among the negatives for India listed in GREED & fear are:
Belt-tightening Moves
"The Reserve Bank of India's tightening moves in July, which seem to have been ordered from Delhi in an attempt to shore up the currency, clearly backfired in large part because of misguided communication and conflicting signals. There have also over the past week and more been retrograde steps to impose restrictions on residents' capital outflow. Thus, the limit for outward remittances was lowered from $200,000 to $75,000 per financial year. The result has been a further loss of investor confidence and a further decline in the currency.
Falling Rupee
The currency has depreciated against the US dollar by 5.6% since the (RBI) announcement to 65/$, and is down 15.7% year to date and 31% since the start of 2011. It is also the case that the latest inflation data has also been less than stellar, which has further highlighted the lack of scope for easing. Thus, WPI inflation rose from 4.86% YoY in June to 5.79% YoY in July.
Sovereign Debt Crisis
The result (of RBI moves and falling rupee) is that India remains in GREED & fear's view the Asian market most at risk of a sovereign debt crisis with chatter apparently growing in Delhi of a potential need to sound out the IMF. This is despite the fact that India does not have a debt market reliant on foreign capital given the lack of foreign ownership of rupee debt. Thus, foreign ownership of Indian government securities was only 1.61% at the end of March, though it is up from 0.88% at the end of March 2012. In this sense, India is not directly correlated into emerging market debt dynamics. Where the foreign ownership is, of course, is in Indian equities.
Slower Growth, Rising NPLs
The higher interest rates and the slower GDP growth also imply declining loan growth and rising NPLs (non-performing loans) in the banking system, most particularly in the 'cheap' state owned banks. Current Indian gross NPLs are 3.7% of total loans but there are also another 4.6% of loans which are in the 'restructured' category.
Despite the temptation to buy "cheap" banks on a contrarian basis, GREED & fear will stick with the expensive quality private sector banks geared to the consumer space since it is far from evident that India has passed the worst. It is also the case that the credit problems are primarily in the corporate and related infrastructure space.
Further, Chris says "as nervousness has increased towards emerging markets, the sentiment on Euroland has been improving with the stabilisation of the GDP data for the second quarter based on flash estimates published by Eurostat on August 14. Thus, Euroland real GDP rose by 0.3% QoQ in Q2 of 2013, led by a 0.7% QoQ increase in Germany and a 0.5% QoQ rise in France. This is the first QoQ increase in Euroland real GDP in seven quarters. But on a year-on-year basis, Euroland real GDP still declined by 0.7% YoY in Q2 of 2013, as compared with a 1.1% YoY decline in Q1 of 2013. Meanwhile, European equities have also outperformed since late June. The MSCI Europe Index has risen by 11.1% in US dollar terms since June 24, as compared with a 6.1% increase in the MSCI AC World Index.
Euro Zone Crisis Not Over
While a catch-up rally in European equities is not surprising given the seeming stabilisation in the data ... GREED & fear remains firmly of the view that the Eurozone crisis is not over. Indeed, investors are now as complacent on the Eurozone as they are neurotic about emerging markets.
----------------------------------------------------------------------------------------------
Rupee has breached 68
Food security bill to cost 1.7-3% GDP or 11-20% gross collected tax.
Private sector in recession while Public sector would not have jobs for 3-4 years due to raising of retirement age from 60-62.
A whole generation is doomed.
CLSA sees ‘greatest hope’ for Indian stock markets in Narendra Modi
26 Aug, 2013, 1240 hrs IST
Chris said, “the Indian stock market’s greatest hope is the emergence of Gujarat CM Narendra Modi as the BJP’s prime ministerial candidate.”
A decision to go to the IMF would appear to be political suicide for the current Congress-led government, says Christopher Wood of CLSA, in his weekly GREED& fear.
Listing a number of negatives for the Indian stock markets, Chris Wood of CLSA says: "the Indian stock market's greatest hope is the emergence of Gujarat Chief Minister Narendra Modi as the BJP's prime ministerial candidate."
In his weekly GREED & fear, Chris says the one potential positive amid all the negatives that the country is witnessing is that the gathering macroeconomic crisis could trigger an improvement in governance. "In this respect, it hardly inspires confidence that Congress leader Sonia Gandhi appeared in Parliament talking up her expensive food security bill," he says.
Chris adds, "even as the odds are definitely stacked against him (Modi), the view is simply that the worse the sense of crisis the better Modi's chance of winning. This is why a decision to go to the IMF would appear to be political suicide for the current Congress-led government."
Among the negatives for India listed in GREED & fear are:
Belt-tightening Moves
"The Reserve Bank of India's tightening moves in July, which seem to have been ordered from Delhi in an attempt to shore up the currency, clearly backfired in large part because of misguided communication and conflicting signals. There have also over the past week and more been retrograde steps to impose restrictions on residents' capital outflow. Thus, the limit for outward remittances was lowered from $200,000 to $75,000 per financial year. The result has been a further loss of investor confidence and a further decline in the currency.
Falling Rupee
The currency has depreciated against the US dollar by 5.6% since the (RBI) announcement to 65/$, and is down 15.7% year to date and 31% since the start of 2011. It is also the case that the latest inflation data has also been less than stellar, which has further highlighted the lack of scope for easing. Thus, WPI inflation rose from 4.86% YoY in June to 5.79% YoY in July.
Sovereign Debt Crisis
The result (of RBI moves and falling rupee) is that India remains in GREED & fear's view the Asian market most at risk of a sovereign debt crisis with chatter apparently growing in Delhi of a potential need to sound out the IMF. This is despite the fact that India does not have a debt market reliant on foreign capital given the lack of foreign ownership of rupee debt. Thus, foreign ownership of Indian government securities was only 1.61% at the end of March, though it is up from 0.88% at the end of March 2012. In this sense, India is not directly correlated into emerging market debt dynamics. Where the foreign ownership is, of course, is in Indian equities.
Slower Growth, Rising NPLs
The higher interest rates and the slower GDP growth also imply declining loan growth and rising NPLs (non-performing loans) in the banking system, most particularly in the 'cheap' state owned banks. Current Indian gross NPLs are 3.7% of total loans but there are also another 4.6% of loans which are in the 'restructured' category.
Despite the temptation to buy "cheap" banks on a contrarian basis, GREED & fear will stick with the expensive quality private sector banks geared to the consumer space since it is far from evident that India has passed the worst. It is also the case that the credit problems are primarily in the corporate and related infrastructure space.
Further, Chris says "as nervousness has increased towards emerging markets, the sentiment on Euroland has been improving with the stabilisation of the GDP data for the second quarter based on flash estimates published by Eurostat on August 14. Thus, Euroland real GDP rose by 0.3% QoQ in Q2 of 2013, led by a 0.7% QoQ increase in Germany and a 0.5% QoQ rise in France. This is the first QoQ increase in Euroland real GDP in seven quarters. But on a year-on-year basis, Euroland real GDP still declined by 0.7% YoY in Q2 of 2013, as compared with a 1.1% YoY decline in Q1 of 2013. Meanwhile, European equities have also outperformed since late June. The MSCI Europe Index has risen by 11.1% in US dollar terms since June 24, as compared with a 6.1% increase in the MSCI AC World Index.
Euro Zone Crisis Not Over
While a catch-up rally in European equities is not surprising given the seeming stabilisation in the data ... GREED & fear remains firmly of the view that the Eurozone crisis is not over. Indeed, investors are now as complacent on the Eurozone as they are neurotic about emerging markets.
----------------------------------------------------------------------------------------------
Rupee has breached 68
Food security bill to cost 1.7-3% GDP or 11-20% gross collected tax.
Private sector in recession while Public sector would not have jobs for 3-4 years due to raising of retirement age from 60-62.
A whole generation is doomed.
![[Bregs]](/data/avatars/m/148/148509.jpg?1491816884){kind=avatar}
thats bound to happen but what my worry is they can do worse to the economy by that time
