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S. Naren ICICI Prudential AMC
2023 was a good year. Multi Asset was a good
strategy in 2023, where equity, debt and gold did
well.
India has arrived and is considered one of the best
structural stories for a long time to come. This
represents one of the best paradigm shifts from the
"Fragile Five". A lot of the top MNCs are setting up
manufacturing bases in India. Many mobile phone
vendors have set up bases in India. India has one of
the best macros with the fastest growing GDP
growth and lower inflation than most of the
developed countries and India's Current Account
Deficit and Fiscal Deficit have been well-behaved.
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S. Naren ICICI Prudential AMC
India's main problem is valuations, which are high. In
Bull markets, people tend to ignore asset allocation.
The next problem is that we should not have a
concentration in any sector. 2000 was heralded by
the dot-com bust, and 2008 by the infrastructure
collapse. Do invest in Flexible categories. At some
point in 2024, there will be euphoria - so do not get
leveraged.
So, although India looks positive for decades to
come, what is important is that major mistakes are
not made, which take years to recover.
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Navneet Munot HDFC AMC
2023 was a year of reversal, where the asset classes
that underperformed in 2022 did well the next year
and vice versa. Global equities performed well on the
whole, except China. The European Union also
remained lacklustre. US growth surprises on the
upside.
With almost half the world population, including
India, expected to go for General Elections this year,
2024 is expected to be an eventful year.
US growth is likely to slow down in 2024
- Excess accumulated savings have largely been
drained out in the past couple of years, likely to
slow down private consumption spending.
- Real yields have turned positive and will likely
remain elevated.
- US housing is likely to remain under pressure as
mortgage rates are elevated
FOR INDIA: THE BEST IS YET TO COME
India's economy will likely become 3rd largest in the
next five years. India is likely to grow at twice the rate
of world growth in the next five years
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S. Naren ICICI Prudential AMC
- India's macro stability is the key differentiator.
(Investment-led growth Government and
Household capex, current account deficit is within
manageable limits and inflation is within limit)
- Consumption: structural demand drivers - young
population, rising middle class, rising penetration
of consumer finance and relatively unleveraged
households
- Investments - Government capex is strong, but the
private sector needs to pick up.
- Resurgence is likely in Manufacturing.
“In the last 50 years of working life in India, I have
never been as optimistic about the future potential
of our country as I am today.”Deepak Parekh
“India has more promise than any other large
country.” Elon Musk
“India is the most important country in the world to
me” Joe Biden
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Nilesh Shah Kotak AMC
- Worried about oil prices going up because of
Middle East conflict - that has not happened
- Worried about GDP growth, where the 2nd quarter growth came way higher than expected.
- In August, we were worried about rain, but it recovered. Monsoon is only marginally deficit.
- We were worried about the continuity of Government, and the State elections allayed those fears.
- We were worried about the Fed keeping interest rates higher for longer - but now they are singing a different tune.
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S. Naren ICICI Prudential AMC
- Even globally, we are looking strong compared to
others:
- Investors cannot go to Russia
- Brazil is looking good, but they have a
communist government.
- In South Africa, people are worried about safety
- not investing
- China is slowing down and has designs on
Taiwan, which will restrict global capital
- Turkey's currency keeps on depreciating
- There are 2 global blocks - Russia/China on one
side and the Western nations on the other. We are
getting oil from Russia and jet engine technology
from America. Hence, India acts on what is good
for India.
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2024 PREDICTIONS
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Central Banks have done a good job balancing growth and inflation. However, this could be
reversed with interest rates being cut and more fiscal prudence.
Elections will have an effect if there are any surprises.
Geopolitical risks in Russia/Ukraine and the Middle East continue.
The main issue is how will Foreign investors allocate capital - will they go to India, which is performing well but expensive or will they go to China, which has 1/3rd valuation.
The massive infrastructure growth - along with talent and capital, should allow India's economy to
continue to grow.
3 Gs will help offset the higher valuations compared to other emerging economies
- • Growth in Corporate earning
- • Governance which is better than other emerging economies
- • Green energy - despite being the 5th largest economy, our per capita carbon
emissions are one of the lowest
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ACTION TO TAKE
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Be careful of places where floating stock is low, as they can move violently in any direction. The
investment horizon should be long as markets could move back to mean valuations.
Indian markets have delivered positive returns for 8 years. Now, you need to temper your
expectations. However, optimistic that in the longer term - we might have event volatility to take
advantage of.
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Sameer Arora Helios Capital
There is so much talk about India's Amrit Kaal,
golden age, etc. But India has always been doing
well, even in dollar terms over 5, 10 and 25 years -
where India has given 13.4% return and the next best
was the US at 7.6%. There is no need to do a hard sell;
this is the best time to invest in India. We have
confidence that similar returns can be maintained
because of some megatrends:
- India is coming into its own with a strong, stable
government, one of the highest GDP growth,
business oriented policies, demographic dividend,
tax reforms, digitization and financialization of the
economy, infrastructure buildup/
- Demographics - young population and hungry to succeed.
- Globally, one in five persons below the age of 25 is an Indian.
- Population expected to peak in 2064 at 1.7 bn
- 400 million and rising middle-class population
- Top 10% or 150 million affluent are also rising.
- Digitalization
- 3rd cheapest data in the world.
- Per capita consumption of data in India is more than US and China combined
- 2nd highest internet users after China
- Highest number of users of U-Tube
- Daily number of UPI payments reaches 10 bn
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Sameer Arora Helios Capital
- Financialization of Savings fuelled by
demonetization and digitalization.
- Physical Infrastructure has reduced the cost of
logistics and travel time and improved Return on
Capital.
- Geopolitics - No permanent friends or enemies -
what is expedient at the moment becomes the
foreign policy.
- Capex cycle - the government capex cycle may be
about to normalize because we have been running
a large Current Account deficit.
- China + 1 - diversification of the supply chain.
- Housing on an upturn after a long downcycle
India has a very low weightage on the MSCI Index. At
15%, it is more or less the same as Taiwan and S
Korea, where our Market Capitalization is double,
and our GDP is multiple times higher. This is
because the free float is about 1/3rd, which implies
that promoters have not had a need to sell to grow
and have done it from internal accruals.
Maybe this is not the time to put a lump sum.
Normally, if one year returns a good - at some time, it
has to slow down and revert to mean. Over five years,
you will get the same returns as the earnings
growth.
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FRANKLIN TEMPLETON AMC 2024 view
Interest rate cuts could further ease financial
conditions in emerging markets and boost
corporate earnings going forward.
- China faces challenges including high debt levels,
an ageing population, slower export growth,
weaker economic activity levels, the slowdown in
the real estate sector (which accounts for 30% of
GDP), among other factors. The relative
attractiveness of India as a destination for FDI,
capital flows, and contract manufacturing
manifests itself through a multitude of factors,
including its structural strength, healthy
corporate and bank balance sheets, the
government's thrust on manufacturing and
infrastructure focus, as well as political stability.
- India vs EM valuation has moderated from
October 2022 levels to hover at 56% premium
levels, a little above the 10-year average of 47%.
Commanding a higher growth rate supported by
structural strength in the economy tends to put
India in a favourable position versus other EMs
and justifies the relative premium that it trades
at.
- Over the medium term, corporate earnings and
equity market returns are tied to economic
growth. The consensus estimate for Nifty 50
earnings growth stands at 15% for both FY24 and
for FY25,
- India is entering a phase of a multi-year capex
cycle. Strong fundamentals such as healthy
balance sheets for the corporate and banking
system, moderating inflation, stable external
accounts, and policy reforms to boost
infrastructure and manufacturing are key factors
supporting robust and resilient GDP growth. In
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FRANKLIN TEMPLETON AMC 2024 view
- addition, multiple factors like a demographic
advantage, rising disposable income, political
stability, and focus on infrastructure
development have greatly shaped consumer
sentiments to boost consumption, thereby
favouring premiumization and high-value,
long-term purchases (housing).
- Growth is expected to be driven by
- domestic consumption, premiumization of consumption
- Infrastructure and capital investment. The Capex boost would be led by continued
momentum in government spending, an
uptrend seen in private sector capex and
household capex growth.
- Green transition – opportunities to emerge as
the economy moves towards the net zero
target of 2070
- New opportunities are emerging in Gen-AI,
new energy businesses, and digital space,
which need to be tapped
- Strong DII support on the back of retail flows to
the markets has been a structural change
supporting the markets over the last few years.
- Factors affecting market sentiments could
include the persistence of tighter global liquidity
conditions and the potential lagged impact of
rate hikes, the probability of slower rate cuts in
HY2024, geopolitical risks and the probability of El
Nino impacting commodity prices. 2024 being an
election year for India, we may expect interim
volatility to persist. It will be crucial for the
markets that the earnings expectations are met.
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INDIA by Peter Ziehan (Geopolitical Analyst)
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We are not likely to see India affected by many of the
negatives sweeping the world. Their energy comes from
the Persian Gulf. They are mainly self-sufficient in
agriculture, including manufacturing fertilisers, and they
are not dependent on trade.
What is the future of India going to look like?
- Manufacturing
Indian experience was also Chinese manufacturing
flooding the market and putting local manufacturers
out of business. So, like the US, India will have to build
things themselves. The US has friends and neighbours in
Mexico and Canada to help them build things - but India
does not have good relations with their neighbours.
However, India does have good skill sets within the
country. So, India can become a manufacturing
superpower just for internal consumption.
- Demographics
India is a young country, but not as young as they think
they are. They still have a large working population. But
like in other countries in the world, when they started
industrialization 35 years ago, the birth rates plummeted.
They have many 25-40 year olds, but they do not have so
many kids. So, instead of paying for diapers and
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- preschool, they buy cars and go on vacation. This is good
for super growth now - the problem is whether the birth
rate can stay high enough to continue super growth.
However, even if the rate of decline remains the same,
there will not be a Germany-like situation for 40 years.
- Strategy
India is a pocket power. It is surrounded by hostile
countries, mountains, deserts, and swamps; It cannot
grow anywhere. So culturally, strategically, India is
insular, and it will be difficult to break out and become a
global power. Also, it is difficult for anyone to break in.
The US has been trying to court India away from its old
Soviet leaning - but it is not working because India has a
history of doing things for India, and it has never had
allies - much less family. So, deals are cut on a
case-to-case basis. India has never had a bilateral
agreement based on trust and sacrifice; their
agreements are based on what is good for India. E.g. not
overly pro-Ukraine but not also hurtful. If there is an
energy crisis, India is close to the Persian fund and could
easily get to it and not too much anyone could do.
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This year is very eventful, with many elections
around the world. Hence, it will be a volatile year -
which will give opportunities from time to time. A
15% correction is normal at least once or twice a year,
and this will allow purchasing at more attractive
valuations. Mid and Small-cap shares are overvalued,
and in these expected corrections, they can fall
faster. Banking is not looking great at the moment -
mainly because of restrictions on FDI investment
and RBI putting curbs on credit card lending. The
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increasing cost of attracting Fixed deposits - has
caused a reduction in Net Interest Margins and,
hence, profitability. Technically, Nifty is not showing
signs of any large correction, and hence, if banking
does not do well, Reliance Industries, IT and Pharma
are likely to perform.
So, although 2024 is likely to be volatile - the Indian
Macros continue to look attractive, and the next 10
years will likely be good for India.
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DEBT MARKET
Unless Inflation picks up again, interest
rates are not likely to go up further.
At some stage, the Federal Reserve is
likely to cut interest rates in the US,
which hopefully would be followed by
rate cuts in India, too.
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GOLD MARKETS
According to the Economic Times and other
predictions, Gold is likely to touch Rs. 70000
(currently Rs. 62,000) per 10 grams in 2024 on the
back of a stable rupee, Geopolitical uncertainties and
slowing economic growth. The US Fed reducing
interest rates will further boost Gold prices. If there is
a "US hard landing", which currently looks unlikely,
then all asset classes will fall, including gold, but Gold
will soon pick up again as it is a safe haven.
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