India markets closed

India’s growth collapse ‘most surprising,’ says noted equity strategist Chris Wood; shares top stock bets

FE Online

After central Bank RBI slashed India’s GDP growth outlook for 2019-20 downwards to 5%, from 6.1% earlier, veteran equity strategist Chris Wood observed that India has seen the most surprising collapse in growth. " India has seen the most surprising collapse in growth, the repercussions of the NBFC issue has impacted growth,"  Christopher Wood, global head of equity strategy at Jefferies said in an interview with CNBC TV18. Interestingly, Wood wrote in his weekly Greed and Fear note that a rebound in growth could take a long time. "There is no doubt that the initial shock impact of these reforms on the economy was underestimated by the Bharatiya Janata Party (BJP) Government. Indeed the Indian economy, and its entrepreneurial classes, could be compared to a former drug addict going through 'cold turkey'. For now, the focus in the Indian capital remains very much on the withdrawal symptoms," Wood said.

Also read: As RBI pulls support, bond market may be on the brink of prolonged rout

Wood maintained his ‘double overweight’ position on the Indian stock market, but explained that it does not necessarily a bullish position. Sharing his top bets, he said that one consistent area of exposure has been the private banks in India. After the RBI’s move to not cut rates in its latest bi-monthly Monetary Policy Review, Wood said that the move could help long-term government bonds. "I personally agree that Monetary Policy was too tight for a long-time, but that has changed now. RBI not cutting rates further will be positive for long-term government bonds," he said. RBI is more independent than most central banks of G7 countries, he added.

After the centre communicated to all states that due to the lower Goods and Services Tax (GST) collections, the compensation cess might not be enough to pay for losses arising out of the tax system, Wood said that centre not paying the states is causing ripple effect amid the ongoing slowdown, which is further impacting growth. Several states including Rajasthan, Kerala, Delhi, Punjab and West Bengal, have publicly urged the Centre to transfer pending compensation payments as they have not received the dues for several months. According to the expert, the ongoing economic slowdown is a great opportunity for top companies in India to consolidate their position.