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Daily Voice | This CIO believes October review of JP Morgan Index will be critical for Indian bond inclusion

Trideep Bhattacharya of Edelweiss AMC says while consensus expectations are pegged around a 50bps hike at the moment, RBI Governor's narrative is likely to be dependent on the signs of near-term peak in inflation in India.

September 28, 2022 / 10:31 AM IST

Of the three major global bond indices, India has a more than reasonable chance of getting into JP Morgan Global Bond Index in the near-term, as it is already on its watch list, Trideep Bhattacharya of Edelweiss AMC says in an interview to Moneycontrol.

He thinks the October governance review of the JP Morgan Index could be of critical importance.

On the outcome of Monetary Policy Committee due on Friday, Bhattacharya, an equity investment professional seasoned for over two decades in Indian and global markets, says that while the consensus expectations are pegged around a 50bps hike at the moment, the RBI governor's narrative is likely to be dependent on the signs of near-term peak in inflation.

The chief investment officer for equities at Edelweiss AMC thinks the RBI is likely to keep its options open to respond to the US policy making changes on the monetary front.

Excerpts from the interview:

Do you think India's inclusion in the bond index will take place by the end of the current financial year?

Of the three major Global Bond Indices - JMP GBI-EM Global Diversified Index, Bloomberg Global Aggregate Index, and FTSE WGBI Index - India has a more than reasonable chance of getting into JP Morgan Global Bond Index in the near-term, as it is already on its watch-list. While the procedural details will take time to be completed, the monetary inflow driven by this inclusion may likely happen in FY24.

The Reserve Bank of India's Monetary Policy Committee meeting is scheduled for Friday. What do you see ahead? 

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While the consensus expectations are pegged around a 50bps hike at the moment, the RBI governor's narrative is likely to be dependent on the signs of near-term peak in inflation in India. Also, we think, the RBI is likely to keep its options open to respond to US policy making changes on the monetary front.

Do you think the RBI will lower its growth forecast for FY23?

The RBI’s move will most likely depend on the economy's response to an increase in interest rates on the face of inflationary conditions in the short term, and is a difficult one to predict. However, we remain constructive on domestic demand drivers present in the Indian economy over the next 3-5 years.

What is the possibility of recession in the US and Europe? And, how do you estimate the impact on India? 

While a lot depends on policy action by the central banks, we would surmise that the US might face a growth recession, while the chances of an outright recession are high in certain European countries as we approach winter.

We believe, this could trigger growth headwinds for India, particularly for the global-focussed businesses from India.

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The Bank of Japan intervened in the currency market for the first time since 1998 to support the yen that depreciated and hit multi-year low against the US dollar. 

Most central banks are trying to tame inflation by increasing interest rates and yet remain competitive by managing the exchange rate in an orderly fashion. The recent Bank of Japan move is a step in the same direction. Also, the rarity of the move reflects the quagmire that the central banks are facing at the moment.

Do you see any possibility of the market hitting new highs by the end of the calendar year? What are the themes that you are betting on?

We are constructive on equity markets from a three-year perspective. This is driven by our positive stance on the following themes which falls across multiple sectors, including rebound in credit growth, private sector investment demand, house-hold capex demand beneficiaries of government growth schemes and China plus one demand, and consumer facing companies with pricing power.

We expect stocks exposed to these themes to do well over medium-term.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Sep 28, 2022 10:31 am