You are sounding bullish on India in your latest report. What kind of recovery are you anticipating and where are you focusing in the the market?
Last week we upgraded India from a market weight to an overweight for our investors globally. The key points are: 1)There appears to be some kind of herd immunity in certain parts of the country because the Covid cases are not nearly as bad as they were before. India is not the only one. There is probably quite a lot of herd immunity in the United States as well. 2) The Budget was very special in my opinion and the finance minister promised the biggest in a 100 years. I really think she delivered. The bad bank being set up is a great thing.
There was the disinvestment plan of PSUs and the IPO for Life Insurance Corporation of India later this year and then getting in India’s sovereigns included global bond indices and opening up the local bond market to retail investors so they can more easily access it. And then on top of that, a very strong recovery came. We are forecasting a 9% GDP growth for India this year, 7% next year. No other country we cover has that kind of GDP growth, not even China. We think that earnings growth will be in excess of 25% this year and next year. And in a nutshell, that makes us optimistic on India.
Sector wise, I mean, a lot of good things are going on, but the creation of a bad bank will bring down the non performing assets of the banks, public sector banks in particular, in conjunction with a strong economic recovery and gradually rising interest rates. One port of call could therefore be the banks.
What about commodities in terms of metals?
The industrial metals have already done extremely well. I believe the prices will be supported by the global economic recovery and the increased usage of metals in many of the things that we use in our day-to-day lives.
I do not know about India but in many parts of the world there is a property boom going on. There certainly is in America, there is in Canada, Australia, in Singapore and in lots of other places. That means good demand for steel, which requires iron ore. So, there is an economic rationale for these prices remaining strong. If they at least remain where they are, then metals producers can continue to rerate because they underperformed the broader market for over 10 years.
