Date: 24th November 2023 | Publication: Ausbiz
India Market Reflecting Earnings Growth
Washington’s legislative paralysis has been resolved with the U.S. House of Representatives electing Republican Mike Johnson, a conservative with little leadership experience, as speaker. Democratic President Joe Biden’s $106 billion spending request for aid to Israel, Ukraine and U.S. border security has been stalled in the absence of a speaker. The U.S. dollar rose to a near 1-week high against most major currencies as investors’ appetite for riskier currencies faded. The Canadian dollar weakened after the Bank of Canada held its key lending rate at 5.0%, as expected, and forecast weak growth while maintaining its option more rate hikes to tame inflation.
India’s market has done well and investors continually question India’s valuations given it trades at a premium to other Emerging Markets, particularly China and other regions. Mugunthan Siva, MD of India Avenue Investment Management, examines the robust valuation at the index level. He connects this progress to India’s earnings growth, currently at a notable 15% rate this decade, in tandem with a potent recovery after the pandemic. The growth drivers, according to Mugunthan, are enhanced productivity, augmented infrastructure, and escalated private capex, marking a shift from the reliance on consumption and finance seen in the previous decade. He shares an optimistic view on investments in India, in line with predictions from India’s Central Bank for substantial GDP growth, likely between 6.3 and 6.5% in the following year. Even with recent challenges faced by Indian banks, Mugunthan observes improved net interest margins and credit growth, while risk-taking is being reduced. He further highlights the success of notable companies like Tata Motors, attributing it to the fast-paced growth in India’s EV penetration. He concludes with the forecast of an ongoing transformation in India’s economy, driven by major infrastructure projects.
