India is relatively a better story but not an absolute return story is the word coming from Christopher Wood, Equity Strategist, CLSA.
Addressing a press conference at the CLSA India Forum, Wood says he is structurally overweight on India although there has been no sign of pick up in investment cycle to help returns. However, macros like lower crude and other commodity prices have helped India. Also with the benchmark rating being extremely low, it is possible to remain structurally overweight on India.
He is extremely concerned with the lack of emergency on part of the Modi government to address the non-performing asset issues in public sector banks, which is a big constraint on the economy. The government has shown no interest in reducing its stake in state owned banks so far, he adds.
There has also been lack of enthusiasm on the part of the government to take populist steps, he says, adding that it has become difficult to convince investors on the India Story and interest of foreign investors towards India has diminished.
However, government along with the Reserve Bank of India have taken steps to reduce inflation is a key positive. According to him the RBI is likely to cut rates by around 200 basis points in 20015-16. Non-passage of GST also has been negative for India, he adds.
Within Asia, he is overweight on India and Philipines.
Globally, he says although the chances of Fed hike in December has picked up due to good employments data, the US economy is not as strong as people think and may weaken over the next 12 months. So, it is very likely that we could see a reversal of policy and more quantitative easing going forward. However, the yields may flatten if US Fed starts hiking rates.
With regards to commodities he is bearish on oil and thinks it is only a matter of time before it breaks below USD 40 per barrel. The threat to oil in due to growing use of alternative energy like solar and attempts made by nations to fix the carbon targets.
For the entire press briefing watch video
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