Goldman Sachs' Timothy Moe is factoring in a 25 bps rate cut by the US Federal Reserve tonight, adding that the impact of a Fed rate cut has not been 'very influential' on India as compared to other Asian market.
Timothy Moe, Chief Asia Pacific equity strategist of Goldman Sachs in a conversation with CNBC-TV18 on September 18 said the US job market has been robust, and the growth environment for equities is looking very good.
"The Fed's modus operandi is less about what will happen in the economy and more about risk management," Moe said, adding, "if Fed goes for 50 bps, the risk would be of rekindling inflation down the road, if it goes too fast. If you go for 25 bps cut, you give yourself more optionality, so that if you're somewhat behind the curve you could quickly catch up."
The Fed is currently about 200 bps away from its neutral rate. This would be US Federal Reserve's first rate cut in over four years.
Read More: US Fed rate cut to serve as starting gun for central banks in Asia
India's benchmark equity index Nifty50 hit a fresh record on Wednesday, having clocked a gain of 17% so far in 2024.
Moe said India's midcap space has created 'tremendous value', with some stocks from the BSE 200 space rising by over ten-fold in last five years. This relentless rise may mean share prices of some of the pockets in the broader market are now 'ahead of valuations', and may be 'overheated', as a result holding some investors back.
On the whole, Moe has 100% bullish on India's structural growth story, adding that India's economy has the potential to grow by over 6% in real GDP terms. There may cycles in this phase, but the structural trend seems to be intact, he said. Goldman Sachs has had a good run of success with the Make in India theme, he said, with spaces like industrials, autos, defence, and tourism having delivered outsized gains.
Timothy Moe added that he sees India Inc delivering earnings growth of 14-15% over next five years.
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