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CLSA not so happy with Modi government, but overweight on India - The Economic Times
NEW DELHI: India remains a good story relative to many other economies largely because its macroeconomic situation is much better compared with most other emerging markets, Christopher Wood, MD & Equity Strategist, CLSA, said on the sidelines of 18th CLSA India Forum in Gurgaon.
"The lack of urgency displayed in addressing the legacy non-performing loan issues is one of my major concerns with the Modi government. It is probably conservative to assume that about 15 per cent of the loans in India are stressed in one form or another, most of the stressed loans are in the state-owned banks, which is likely to delay the investment cycle in the economy," he said.
Wood said if the investment cycle gets delayed, monetary easing would not be as effective as it would be otherwise. "This is the biggest concern from an Indian standpoint," he said.
For minute-by-minute market/stock updates, follow our Twitter handle @ETMarkets
Commenting on the economy and the market, Wood said he is a big structural overweight on India and that India remains a better relative story than an absolute return story.
"It remains a good relative story because its macro position is much better than most other emerging market countries. It remains one of the bigger emerging markets, and the biggest beneficiaries of lower commodity prices," he said.
Wood said it is a matter of time before crude oil breaks below $40 a barrel. "I remain bearish on oil, but in terms of absolute return, the problems in India are that we still do not see any evidence of a pickup in the investment cycle," he said.
From a stock market point of view, Wood said his main concern is that earnings growth continues to be sluggish and there could be more downgrades. "The offsetting positive is that we had significant rate cuts in India and we will have more rate cuts on the 12-month view," he said.
Wood forecasts a minimum of 200 bps of rate cuts in India during 2015-2016. "We have already had 125 bps of rate cut and my guess is that we will have more than 200 bps of rate cut in 2015-2016."
The only negative that Wood sees with respect to Indian equities is that there is no clear evidence yet on any pickup in the investment cycle while the earnings picture remains mixed.
NEW DELHI: India remains a good story relative to many other economies largely because its macroeconomic situation is much better compared with most other emerging markets, Christopher Wood, MD & Equity Strategist, CLSA, said on the sidelines of 18th CLSA India Forum in Gurgaon.
"The lack of urgency displayed in addressing the legacy non-performing loan issues is one of my major concerns with the Modi government. It is probably conservative to assume that about 15 per cent of the loans in India are stressed in one form or another, most of the stressed loans are in the state-owned banks, which is likely to delay the investment cycle in the economy," he said.
Wood said if the investment cycle gets delayed, monetary easing would not be as effective as it would be otherwise. "This is the biggest concern from an Indian standpoint," he said.
For minute-by-minute market/stock updates, follow our Twitter handle @ETMarkets
Commenting on the economy and the market, Wood said he is a big structural overweight on India and that India remains a better relative story than an absolute return story.
"It remains a good relative story because its macro position is much better than most other emerging market countries. It remains one of the bigger emerging markets, and the biggest beneficiaries of lower commodity prices," he said.
Wood said it is a matter of time before crude oil breaks below $40 a barrel. "I remain bearish on oil, but in terms of absolute return, the problems in India are that we still do not see any evidence of a pickup in the investment cycle," he said.
From a stock market point of view, Wood said his main concern is that earnings growth continues to be sluggish and there could be more downgrades. "The offsetting positive is that we had significant rate cuts in India and we will have more rate cuts on the 12-month view," he said.
Wood forecasts a minimum of 200 bps of rate cuts in India during 2015-2016. "We have already had 125 bps of rate cut and my guess is that we will have more than 200 bps of rate cut in 2015-2016."
The only negative that Wood sees with respect to Indian equities is that there is no clear evidence yet on any pickup in the investment cycle while the earnings picture remains mixed.
