Informist, Wednesday, Jul 3, 2024

--HSBC: See India's GDP growth moderating in rest of 2024

--HSBC: Likely govt focus on welfare may boost rural demand

--HSBC: Likely govt focus on welfare may support pvt consumption

--HSBC: See pick up in private capex, FDI

--HSBC: We are bullish on Indian local currency bonds

--HSBC: MPC 4-2 split vote in Jun hints at eventual pivot to rate cuts

--HSBC: Rupee one of the best performing currencies in Asia

MUMBAI – Even as India's economic momentum remains robust, the country's GDP growth is likely to moderate in the rest of 2024, HSBC said in a research report. This comes against the backdrop of India's GDP growing faster than expected in the quarter ended March at 7.8%.

Potential government focus on welfare measures could help boost rural demand and support private consumption, according to the research report. "We also expect a pick-up in private capital expenditure and foreign direct investment, with the election uncertainty behind us," it added.

With this outlook, the London-based bank maintains a mild overweight stance on Indian equities over the next 6-12 months as long-term fundamentals still paint a supportive backdrop, it said in the report.

"We continue to favour large-cap equities over small and mid-cap equities, owing to their more defensive characteristics and cheaper valuation," James Cheo, chief investment officer for southeast Asia and India at HSBC, said. "From a sector perspective, we favour Indian banks, consumer discretionary and industrials which benefit from the booming digital economy, consumer spending and government spending push towards infrastructure and manufacturing."

On the fixed income and currency front, the research report noted that the Indian rupee remained one of the best performing currencies in Asia, aided by the Reserve Bank of India's proactive stance on using its sizeable foreign exchange reserves to manage currency volatility, and structural inflows into Indian bonds.

When it comes to Indian local currency bonds, the bank is "bullish", it said. The Monetary Policy Committee's four-two split vote at the June policy review meeting pointed towards an eventual pivot to rate cuts, which in turn might lead to capital appreciation and a decline in yields, according to the note. At the June meeting, the six-member committee voted four-two on both rates and stance, with external members Ashima Goyal and Jayanth Varma being the dissenters. Currently, the repo rate stands at 6.50%, and the policy stance is 'withdrawal of accommodation'. End

Reported by Nishat Anjum

Edited by Avishek Dutta

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