Summary
In this talk Nilesh discusses the changing global economic landscape, with a focus on factors such as trade restrictions, geopolitical risks, inflation, interest rates, and the performance of different sectors. He highlights opportunities in the Indian market, particularly in the consumer and banking sectors, as well as in long-duration debt and gold investments.
Highlights
- Global economy
- The global economy has shifted to a new paradigm – from globalisation to protectionism, and from fiscal/monetary stimulus to withdrawal. Yet equity markets have continued to rise.
- US growth is fuelled by debt. This is causing high deficit, and resultantly, high interest payments.
- Inflation is easing off in most parts of the world, leading to interest rate cuts by central banks in many countries. However rising commodity prices, in part caused by Chinese hoarding can push inflation higher.
- Indian Economic outlook
- In FY 25, India is expected to grow at 6.8% and China at 5% while the world grows at 3%
- India’s share of world exports is rising resulting in lower current account deficit.
- We need to see the budget and the impact of a coalition government. Some reforms may be delayed and rural spend may increase leading to a revival in rural consumption.
- Credit growth remains robust.
- Investment outlook
- Private banks and the consumer sector are expected to perform well. The IT sector has underperformed but may see growth in future if business volumes increase.
- Expectation of a cut in interest rate remain. Indian bonds are poised to attract foreign portfolio investors due to their higher yields, inclusion in global bond indices, and a stable currency. Additionally, with a lower bond supply and anticipated rate cuts, long-duration bonds are expected to outperform other segments of the yield curve. Private banking may do better than public sector banks.
- While Financial services, aviation, telecom, and some midcap IT companies declared good results, gas and energy sectors results were below expectations.
- Valuations are at a premium to historical averages. While large caps trade at a 4% premium, mid and small caps are at 29% and 27% respectively. Investors need to be careful in expensive and low free-float stocks.
- Central banks continue to buy gold – making gold a good investment option.
- Risks
- Risks can arise out of a possible global recession, delayed rate cuts, or lower earnings trajectory. Geopolitical risks materialising can also cause high volatility.
