According to market veteran Bharat Iyer, “India would be overweight for him” if he were a global investor or an investor from developing countries with a medium to long term outlook.
He cited two reasons for his optimism: India’s usual demographic advantage, which he expects to grow stronger in the next 15-20 years. The other, he said, is that in a world with high liquidity, “we have the ability to absorb a lot of capital and we offer very attractive returns.”
However, Iyer warned that profits will not rise by the expected 30% in the near future unless the second wave of Covid-19 is stopped. “India’s lag in global markets could continue until a critical mass of the population is vaccinated and there is more confidence in growth,” he told BloombergQuint Niraj Shah.
Over the past two months, global sectors such as mining and metals and information technology have done better than domestic-oriented sectors such as banking, automotive and real estate, he said. However, he advises using downturns in the domestic sector to “gain positions.”
According to him, India’s economy will be more dependent on local than on global factors, adding that segments of domestic consumption have great potential.
Emerging and developed markets
The controversy over the potential of developed and riskier emerging markets “will not be very easy” and will vary from country to country, he said. Even in developed markets, the US appears to outperform Europe with better vaccination and growth data, he said.
Some emerging markets will do better in terms of vaccinations initially, he said. According to Iyer, the index of economic surprises on the positive side, therefore, will be better for some markets and worse for others.
“You will be surprised to learn that three developing countries have actually raised interest rates in the last three months,” indicating that some emerging markets are very confident and happy with their concept of growth. Some, however, warn that the stimulus may be suppressed while others still need to maintain the stimulus, he said.
According to him, the US markets are in the “golden zone” due to extremely positive data on vaccinations and growth. But inflationary “the fears are true and you need to keep a close eye on these data, which, if they become ugly and increase yields, could pose a problem. “