India

Decelerating nominal sales, a peaking credit cycle, and very high valuations - Indian stocks will not escape the carnage when risk assets globally begin to sell off.

India’s intake of industrial commodities is 10-to-20 times as small as China’s. Capital goods are five times as small. Hence, India is not in a position to offset any decline in Chinese demand for these commodities and goods.

Investors should underweight global equities and risk assets; overweight US stocks relative to global; and overweight defensive sectors versus cyclicals.

Indian stocks have gone up this year even as the broader EM markets have been falling. How long can Indian markets continue to rise?

Indian EPS growth is set for major disappointments vis-à-vis the lofty expectations. Weak domestic demand amid tight fiscal and monetary policy entails more downside in stock prices. Stay underweight.

In this Special Report, BCA Strategist Ritika Mankar highlights that India may prove to be a sanctuary of safety in what promises to be a volatile 2023. Indian equity outperformance could continue, as India ends up offering relatively high growth at a time when EMs at large must contend with the effects of declining exports, high global interest rates, and exhausted fiscal stimulation capabilities.