The current combination of near highest ever premiums, four years of downgrades, current account deficit, rising oil prices and that foreign investors have yet to capitulate, suggest that India could be the next shoe to drop.
Influential global experts like Chris Wood of CLSA and Sakthi Siva of Credit Suisse are turning cautious on global and Indian equities in near term.
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Wood in his weekly newsletter, Greed and Fear, said “world stock markets have been remarkably calm over the past week."
In his view, this is a lull before the next storm as two developments during this period raised global risks.
First, the American demands, or “ultimatum”, regarding trade issues with China are more aggressive, and therefore more inflammatory, than greed and fear would have supposed.
Greed and fear does not agree with a lot written by the aggregate demand-obsessed Martin Wolf in the pinko paper.
Wood however had to agree with Wolf's comments made on Wednesday that “both economically and politically, the US is going about this in the wrong way, not only because it is seeking to humiliate China, but because it is simultaneously waging commercial war on its potential allies”
Could India be the next shoe to drop?
In her strategy note this morning, Sakthi Siva of Credit Suisse wrote, “with continued downgrades to consensus earnings per share and weak return on equity, India’s premium on price-to-book ratio–return on equity valuation model has now risen to 64% – close to its highest ever.
Siva reiterated her "underweight" call on India in an Asia Pacific context and fees while overvalued markets could stay that way for longer than expected, especially if the US-China trade war escalates.
The current combination of near highest ever premiums, four years of downgrades, current account deficit, rising oil prices and that foreign investors have yet to capitulate, suggest that India could be the next shoe to drop, the brokerage said.
Looks like timely advise from some of the biggest equity watchers …
First Published: May 11, 2018 9:03 AM IST