Neelkanth Mishra, India equity strategist & MD at Credit Suisse, spoke to CNBC-TV18 about the growth slowdown and policy expectations.
According to Mishra, money supply to GDP growth has lagged for almost two years now and the solution to the problem of low liquidity would be rate cuts but minor cuts may not work.
“Even if inflation rebounds to 3.5 percent, there is still adequate room for rate cuts to happen,” Mishra said on Wednesday.
With regards to the growth slowdown, he said, "It is unlikely to be rectified for the next two quarters. Till the NBFCs are not growing and I don’t think they are growing for next 3-6 months, till the bond market does not start to function well and till the time aggregate credit growth does not pick up beyond nominal GDP growth, I don’t think we would see a growth recovery, so it is not just about external capital."
“So the flows we are seeing is a classic sign of India being a low beta market, less integration to the world and with low rate expectations globally now, people are more tolerant of high PEs, which is why we are seeing so much of inflow from FIIs,” he said.