In a recent GREED & fear note, Christopher Wood, Global Head of Equity Strategy at Jefferies,, unveiled a stark divergence in the performance of their investment portfolios for India and China, providing insights into the contrasting economic landscapes of the two Asian giants. What Is particularly interesting in the Indian context is that the report notes the shift in the Indian economic paradigm – with investment now driving growth, reversing the consumption-centric pattern of the past decade.
As of year-to-date, Jefferies’ long-only India
Despite the usual market
Wood emphasized the buoyancy in India’s economic indicators, particularly spotlighting the latest quarterly GDP data. In the September quarter, India’s real GDP surged by an impressive 7.6% YoY, surpassing consensus expectations by one percentage point. Noteworthy is the shift in the Indian economic paradigm, with investment now driving growth, reversing the consumption-centric pattern of the past decade.
Real private consumption in India exhibited a 3.1% YoY increase, while real gross fixed capital formation (GFCF) witnessed an 11% YoY uptick. The construction and manufacturing sectors also contributed significantly, recording growth rates of 13.3% YoY and 13.9% YoY, respectively, in the September quarter.
Mahesh Nandurkar, Jefferies’ head of India research, highlighted a key trend: the GFCF as a share of GDP has risen by three percentage points from the low. The annualized GFCF to nominal GDP ratio has climbed from 26.5% in 4QCY20 to 29.4% in 3QCY23. Nandurkar forecasts further growth, projecting the GFCF to nominal GDP ratio to reach a near decade high of 30% in FY24, up from 27% in FY21.
In light of the robust 7.7% YoY real GDP growth in 1HFY24, the Reserve Bank of India
Wood also noted an intriguing data point: a 12% YoY growth in October in the index measuring the production of the eight core industries in India, including energy, coal, natural gas, petroleum refining, cement, and steel
Despite the current disparities, Wood acknowledged the potential for a surge in China’s outperformance, especially if positive policy surprises come into play. The market remains attentive to further developments, awaiting cues for potential shifts in investment strategies amid the evolving economic dynamics in both nations.