India may not grow better than peers in '12: Morgan Stanley
Ruchir Sharma, Co-Head Emerging Markets at Morgan Stanley Investment Management doesn‘t expect India to perform better than its peers this year.
April 17, 2012 / 17:56 IST
Ruchir Sharma, Co-Head Emerging Markets at Morgan Stanley Investment Management doesn’t expect India to perform better than its peers this year.
“India's growth rate dipped to below 7% last year, stock market fell by 35% in dollar terms and also the fiscal deficit is widening, so India won’t be a breakthrough nations this year,” he told CNBC-TV18. Meanwhile he feels commodities are one of the worst performing asset classes in the long term. "We have looked at commodities going back last 200 years and they follow this consistent pattern which is two decades down and one decade up. They have done much worst than stocks, bonds and even gold," he added.Below is the edited transcript of the interview. Q: What is your take on the Indian market now? How do you think will it perform this year?A: If the Indian economy grows at 6%, a lot of people tell me isn’t that great after all India is growing at 6% and that is far higher than the global average, I tell them no because there are two points here. First that nobody expects India to grow at 6%; expectations were of 8-9% in 2010 and second point is the per capita income- that poorer a country higher should be the growth rate theoretically. So, if a poor country grows at only 3-4% that is a much less significant development than a rich country. Those are the two very important metrics to look at when defining a breakout nation. India's case is classic that last year the growth rate dipped to below 7%, stock market in dollar terms fell by 35% and also fiscal finances went out of order. Expectation is a key and breakout nations are for me those countries, which will beat expectations and also grow better than their peer group in the same income class and by that I mean per capita income.Q: What about the global commodities space then?A: We have looked at commodities going back last 200 years and they follow this consistent pattern which is two decades down and one decade up. So, in the long term commodities are one of the worst performing asset class. They have done much worst that stocks bonds and even gold. Gold is a commodity, but sort of in the middle of asset classes.Today, the average daily trading volumes in the energy space are bout 18-19 times underlying demand. A decade ago this number used to be 3-4 times, so there is lot of hot and speculative money chasing this. My point is when that is happening be wary particularly when the long term history of commodity is down and at a time when China is showing some signs of seriously slowing down. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
