In­dia no longer pre­ferred among emerg­ing mar­kets: Christo­pher Wood

The Pak Banker - - 6BUSINESS -

MUM­BAI: In­dia is no longer the pre­ferred desti­na­tion among emerg­ing mar­kets for the month, said Christo­pher Wood, man­ag­ing di­rec­tor of CLSA Ltd, an Asia-based equity bro­ker and in­vest­ment group, on Thurs­day. "The rea­son the ru­pee is vul­ner­a­ble is be­cause In­dia is no longer flavour of the month in emerg­ing mar­kets," Wood said, in his news­let­ter ti­tled, 'Greed & Fear'. "Rather ' over­weight' for­eign in­vestors have been sell­ing In­dian eq­ui­ties this year," Wood said. For­eign in­sti­tu­tional in­vestors have been net sellers of $2.2 bil­lion of In­dian shares, and $1.1 bil­lion of debt, year-to-date. Though they have been net buy­ers of In­dian eq­ui­ties for the first three ses­sions of March, ex­perts see more sell­ing in the off­ing.

"Still there is a lot more sell­ing that could po­ten­tially oc­cur since for­eign in­vestors' ag­gre­gate hold­ings to­tal $308 bil­lion (in­clud­ing $257 bil­lion in In­dian eq­ui­ties and US$51 bil­lion in debt), a sub­stan­tial fig­ure in the con­text of for­eign ex­change re­serves to­tal­ing $350 bil­lion," Wood said.

"Cer­tainly more for­eign sell­ing can­not be ruled out given the con­tin­u­ing over­weight stance and Greed and Fear's base case of re­newed risk aver­sion glob­ally sooner or later. It is also the case that there con­tin­ues to be a lack of ev­i­dence of re­newed cycli­cal mo­men­tum in In­dia with credit growth still run­ning only slightly above nom­i­nal GDP growth," added Wood. Ac­cord­ing to him, the con­tin­u­ing sub­dued credit growth is proof that In­dia re­mains in a delever­ag­ing cy­cle. "Mean­while, it is im­por­tant to note re­cent anec­do­tal ev­i­dence that the long fes­ter­ing NPL (non-per­form­ing loans) is­sue in state-owned banks are start­ing to be ad­dressed," Wood pointed out.

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