Tag: growth slowdown

Time right for gradual accumulation of strong companies, says Ratnesh Kumar of BOBCAPS

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In wake of the coronavirus spreading outside of China and around the globe, there was an expectation of coordinated action in terms of rate cuts and easing from central banks around the world. Yesterday, the US Federal Reserve cut rates by 50 basis points  but the market initially went up then sold off.

However, the way the market reacted was in line with what we have seen previously during these emergency cuts. To discuss the impact of all these on markets, CNBC-TV18 spoke with Ratnesh Kumar of BOBCAPS.

According to him, in the last 20 years, whenever we had inter-meeting cuts, they have been in response to some sort of severe stress or the crisis that the central banks saw on the horizon. “So the way the market is looking at it is clearly the inter-meeting cut is a reflection of how severe the problem or the disruption is expected to be. So, it is the first step that the market thinks the central banks have taken and to that extent, the focus of the market is on what is the impact on the real economy on trade and growth and that is where the caution is that the impact on global growth, on global trade could be fairly significant in the short-term,” he said.

“This crisis is nowhere comparable to either the tech bubble burst or the 1998 the inter-meeting actions or 2008 where the consequences remained for many years to come. Here, expectation of the market is that probably for a quarter or a two, there would be an impact on growth and then this will gradually peter out,” he added.

Talking about their portfolio approach, he said “Aviation was never a preferred sector. However, if one were to look at other companies then the stock prices have come down and it is quite likely that as the Q4 commentary from different companies and different sectors come out, over the next few weeks, you will find some more weakness in the market broadly, and the companies that are impacted,”

“This would be a period for gradual accumulation of strong companies because the expectation is that whenever the coronavirus is contained be it in a quarter or more, subsequent to that there would be a shift towards normalisation, there would be a bounce back,” Kumar said.

Sector specific, he said, “Global commodities are going to be under pressure for a period of time. Already the global growth was slowing and with this crisis, the growth slowdown is going to be deeper. To that extent, one is already seeing a negative impact on oil, on metals. So, global commodities is a space  to avoid and not necessarily look for bottom-fishing.”

“In terms of other sectors – there are certain smaller sectors where the impact of the trade disruption especially with China is going to be quite severe, one of which is solar panels because almost 60-70 percent of solar panels have been coming from China. So. naturally even as things normalise there over the next couple of quarters, there would be some significant impact on that sector,” he further added.

“We need to look sector by sector where downsides could be seen like in auto ancillaries, sectors where there could be supply disruptions or delays,” he added.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Coronavirus cure difficult to emerge; likely to spread further, says Financial Times’ Martin Wolf

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Martin Wolf, chief economics commentator at Financial Times is of the belief that the coronavirus will hurt the global economy in the second quarter as well.

“My view has been not to have expectations about what could happen because we don’t know but it seems very plausible that it could spread. It is a very difficult disease because you are infectious before you are symptomatic. So unless you stop everybody from moving, it is likely to spread,” said Wolf.

“Now that it is in Europe, it is going to spread across Europe and that almost certainly means it is going to spread across the world because Europe is completely integrated into the world. We have to hope that the disease will die down in the summer, we don’t know but it is clear now that this is going to be a significant factor for the world economy,” he said in an interview with CNBC-TV18.

“Everybody expects this first quarter to be very bad and I would say now it seems likely that Q2 will also be very bad; lots of movement will stop, tourism will be down, trade will be down and Europe is a very important continent from this point of view. So, I would expect it to be a significant jolt,” he added.

Now real question is would the world economy recover in Q3 and Q4 as the disease dies down but at this stage we don’t know. Moreover, we don’t know what the fatality rate will be,” he said.

According to him, it is always difficult to find a cure for virus,” What I have been reading suggests that cure is not likely to emerge quickly. They of course know the structure of the disease but creating a cure that works seems to be quite difficult. So, I am assuming it is not going to be available in the next couple of quarters and it is therefore likely to spread further,” he added.

When asked about India and growth slowdown, he said, “I do think if nothing changes very much, Indian policy remains sort of where it is and the world is sort of where it is, India’s growth is not likely to be above 7 percent and is more likely be around 6 percent.”

“If everything goes roughly where we are now without any huge negative shocks, if India is to grow much faster than that, which means it is going to grow 2.5-3 times as fast as the world economy then some things have to improve a lot and the most obvious one is export competitiveness has to improve and that is a point that Arvind Subramanian has been making. You cannot have rapid growth without exports growing at least as fast as your economy,” he noted.

“Indian exports have to start growing at 8 percent a year or so, which is nowhere near what is happening and for that to happen, you need massive improvements in competitiveness, attraction of foreign investment. So, you have to do almost what China did. So, that needs change, a purposeful change,” he said, adding that it is not just about export competitiveness, it is also about the infrastructure and the other things, the skills etc.

“So, I am assuming that without those policy changes, particularly with the instability we are seeing now, India’s growth is probably going to be in the 5-6 percent range and that is very depressing because that means employment growth is not adequate. If employment growth is not adequate, you have got a lot of unhappy people here –so, where does that lead Indian politics? It could lead it to a very dark place. So it is very important that policy improves if India is to remain stable, prosperous and happy, which is what I want it to be,” he further mentioned.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India Ratings expects Q2 growth at 4.7%; cuts 2019-20 GDP forecast to 5.6%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian economy may have slowed for the sixth consecutive quarter in July-September to 4.7 percent, Fitch group firm India Ratings and Research said on Tuesday, as it lowered GDP growth forecast for current fiscal for the fourth time.

The Indian economy expanded 5 percent in April-June, its slowest annual pace since 2013. The 4.7 percent projection for the second quarter of the current fiscal would mark six consecutive quarters of slowing growth, a first since 2012.

This comes despite a recent series of fiscal stimulus, including a reduction in corporate tax rates.

“India Ratings and Research has revised its GDP growth forecast for FY20 to 5.6 percent. This is the fourth revision and has come in after the agency had revised its FY20 GDP growth forecast only a month ago to 6.1 percent,” the rating agency said in a statement.

The revision, it said, became “inevitable as the high-frequency data now suggests that the agency’s estimate of 2QFY20 GDP growth coming in a little higher than 5 percent is unlikely to hold”.

“The new projection suggests that 2QFY20 GDP growth is likely to be 4.7 percent,” it said.

Second-quarter GDP numbers are likely to be announced on Friday.

“Despite favourable base effect, declining growth momentum suggests that even the 2HFY20 will now be weaker than previously forecasted and is likely to come in at 6.2 percent,” India Ratings said.

India’s growth outlook has weakened sharply this year, with a crunch that started with the non-banking finance institutions spreading to retail businesses, car-makers, home sales and heavy industries.

India Ratings’ growth forecast is a tad lower than 5.8 percent revised outlook for India projected by Moody’s Investors Service.

This comes despite the measures taken by the Modi government to arrest the growth slowdown. In September, it announced a cut in the corporate tax rate to 22 percent from 30 percent. It also lowered the tax rate for new manufacturing companies to 15 percent to attract fresh foreign direct investments.

The tax rate reductions bring India in line with rates in other Asian countries.

The government’s other initiatives include bank recapitalization, the mergers of 10 public sector banks into four, support for the auto sector, plans for infrastructure spending, as well as tax benefits for startups.

India Ratings (Ind-Ra) said the 5.6 percent GDP growth will require “heavy lifting by the government”.

“Although government expenditure did not witness much traction in 1QFY20 due to parliamentary elections, it picked up significantly in 2QFY20. Combined capital and consumption expenditure of central and 20 states government in 2QFY20 grew 37.8 percent and 20.1 percent, respectively, and Ind-Ra expects it to continue in 2HFY20 leading to the central government’s fiscal deficit coming in at 3.6 percent of GDP,” the statement said.

If the central government adheres to the budgeted fiscal deficit of 3.3 percent of GDP by cutting/rolling over expenditure, then Ind-Ra believes FY20 GDP growth could be even lower than 5.6 percent.

It put growth in private final consumption expenditure (PFCE) at 4.9 percent in FY20, slowest since FY13.

“Ongoing agrarian distress and dismal income growth so far, coupled with subdued income growth expectations in urban areas have weakened the consumption demand considerably. Even the festive demand has failed to revive it and this is reflected in the current data of non-food credit, auto sales and select fast-moving consumer goods,” it said.

Despite the likely fiscal stress arising out of the reduction in the corporate tax rate, the government has not announced any change in its 2HFY20 borrowing programme.

Ind-Ra expected current account deficit to decline to 1.8 percent of GDP in FY20 aided by the softer crude oil prices and lower capital goods import and Indian rupee to average 71.06 against the US dollar in FY20.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Raamdeo Agrawal of Motilal Oswal on how to ride market’s ups and downs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Raamdeo Agrawal, the co-founder of Motilal Oswal Financial Services, believes in flowing with the market, irrespective of whether they are at a high or a low.

“Whenever markets are high I tend to be bullish in mind and whenever it is low I tend to be low. So I flow with the market, though my portfolio remains 100 percent invested in low as well as high,” said Agrawal told CNBC-TV18 on Friday.

“My sense is everything is like a pendulum; the foreigners went from high to low and domestics went from low to high. Now the domestics are coming from high to low and the foreigners are going from low to high. So it’s cross pendulum,” he added.

Talking about the growth slowdown, he said, “All kinds of things happen in the economy. These are phases; we had IBC process underway, we have RERA underway, we have GST underway, we had aftereffects of demonetization, people are scared of carrying cash. The structure of the economy was built in 60 years and now there is a lot of positive change in the last 4-5 years. So the entire economy has come to grip with the new rules of the game.”

On the stocks front, Agrawal said, “ITC, I would definitely recommend that you must hold on if you are holding on. It’s the best category anywhere in the world, in India also, in terms of wealth creation.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow