June 2, 2023

Great Indian Mutiny

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India, the growing surprise of equities | Markets

The keys to the Indian economy and its stock market – represented on the BSE Sensex 30 index – are not far off from those handled in the Western economy. Strong growth in public investment (+ 24%) to boost growth led to the digitalization of its energy and decorbonization and a firm commitment to improving national productivity. These are the guidelines put forward by the Government of India in its annual budget last Tuesday and have been completed with a comprehensive plan to privatize public enterprises. In “compulsion”, the same concerns appear: the fear that inflation (inflation is now 6.5%) and interest rates will be 4%.

Economic stability in the Indian stock market has already been reflected in the past year after the devastating effects of the Kovit-19 epidemic. The BSE Sensex 30 index surprised emerging markets by 2021, up 22% from its Chinese neighbors. Mutual funds multiplied this gain. As a model, Goldman Sachs India equity portfolio rose 44.4%; Shares of HSBC GIF India rose 37.9% and Fidelity Fund India 34.5%. This year, volatility in all markets, the index is almost flat.

The good forecasts of companies like OECD – which estimates GDP growth to be 9.4% this year and 8.1% next year – maintain the confidence of analysts in the Indian stock market with the submitted budget. Not only are their ratings negative after the rally, but Hiran Dasani, head of Indian equities at Goldman Sachs Asset Management, says: “Although the ratings are higher than their long-term average in the Indian stock market, we think. It is very reasonable because of the structural reforms, the return on investment and the resistance shown during the epidemic. At Goldman, the current moment in India reminds them of 2003, a time of high investment and corporate profits.

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In International Manager Fidelity they show their confidence in the Indian economy and its stock market in the medium and long term, “driven by the structural machinery of growth, solid population, presence of quality companies and its business culture. Our investment fund in India continues to focus on quality companies leading the way in infrastructure development, ”they point out in this week’s report. Of course, they warn of the importance of controlling inflation and rates, because a lack of control over these variables can cancel out a portion of growth coming from public spending. The cost of reliability will benefit finance, businesses, capital goods, automobile construction and real estate.

According to Amol Coquette, financial manager of Carmignak’s Emerging Equities Group, the financial and automotive sectors are the most likely to gain in the Indian stock market. “The banking sector in India has done a great job in resolving non-performing asset issues and now credit growth is picking up again. Similarly, the Indian car industry has been weak for many years, but green shoots are forming, ”he explains.

Furthermore, the Carmignac expert likes the latest guidelines for the Indian economy: “The clear message of the budget presentation is that the government wants to boost growth by encouraging capital investment. And while he waits until the private sector starts to reinvest, the executive will increase investments in infrastructure.

The Indian stock market may surprise the financial world again this year, and may do so in the context of a commitment to growth linked to clean energy. Yes, the investment effort will cause a general deficit of 6.9% this year, which is expected to fall to 6.3% in 2023. There is nothing very different from what is happening in these areas, which are exceptional in public spending.

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A quiet giant keys

Infrastructure. India is working to improve smart cities, industrial corridors, railways, highways, renewable energy and affordable housing projects. Some projects are worth $ 1.4 trillion over the next five years. It will provide ample opportunities not only for the economy but also for investment in construction materials, industries and related services.

Privatizations. According to Goldman Sachs Global Investment Research, the Indian market capitalization is expected to grow to $ 400,000 million in the next two or three years due to privatization. India’s market capitalization is expected to grow from the current $ 3.7 trillion to $ 5 trillion by 2024, making it the fifth largest stock market.

After the United States and China. The UK’s Business and Economic Research Center (CEBR) says the Indian economy could become the world’s third largest economy by 2031, after the United States and China.