India: Great expectations versus ground realities – ANZ
|ANZ analysts suggest that Indian risk assets are not at stratospheric levels but recent valuations, particularly for equities and the rupee, remain out of sync with moribund growth.
Key Quotes
“Discounting future cash flows, equity prices are admittedly forward-looking. However, the problem is that India's growth in the foreseeable future is unlikely to rise to its potential level of around 7%.”
“Recent tax cuts, though undisputedly important in placing India in a competitive tax jurisdiction, will prove insufficient when growth is being impeded by weak aggregate demand and a fractured financial system. The absence of accompanying structural reforms in the land and labour markets also cast doubt on whether the pay-off from tax reforms is adequate to catapult India into a global manufacturing hub.”
“Rather, we expect more of the same — a continuation of negative surprises to consensus growth estimates, most likely through the first half of 2020.”
“An attendant de-rating of Indian equities via diminished foreign portfolio flows can pressure the INR, but only if the basic balance of payments position deteriorates. At the same time, a fiscal slippage will add to the risk premia on Indian assets.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.