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Indian Economy


nwoodman
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MS is out with an update on the Indian Economy.  A couple of graphs that may be of interest.  Chart pack attached.

 

“We expect cyclical recovery in subsequent quarters: While near-term risks have emerged due to supply-side shortages, at the margin the situation has been stable, and we expect the impact to be transitory. We expect vaccination rates to reach a critical mass by early next year, which will help in broadening the recovery, and external demand conditions remain supportive. As such we maintain our growth forecast at 10.5% for F2022e. Risks to growth outlook are balanced and stem from Covid-19 management / pace of reaching full vaccination, continued supply side disruptions which weigh on both growth and inflation negatively.”

 

 

 

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india oct 21.pdf

Edited by nwoodman
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I am optimistic on India economy recovering post-covid but market valuations look very hot in India compared to other emerging markets- a lot of Fairfax India's holdings & FFH's holdings have had large run ups over the last 12 mths - I think we should all be prepared for more volatility & downside risk but given the wide FFH/FFH India valuation discounts  IMO I am not worried so much if we see some downside here on individual holdings

https://economictimes.indiatimes.com/markets/expert-view/market-very-frothy-exit-and-take-out-some-money-now-sandip-sabharwal/articleshow/86473289.cms

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8 minutes ago, glider3834 said:

 

I am optimistic on India economy recovering post-covid but market valuations look very hot in India compared to other emerging markets- a lot of Fairfax India's holdings & FFH's holdings have had large run ups over the last 12 mths - I think we should all be prepared for more volatility & downside risk but given the wide FFH/FFH India valuation discounts  IMO I am not worried so much if we see some downside here on individual holdings

 

Agree, a good time to be taking assets public. 👍.  I haven’t come across any news on the Anchorage float perhaps they are waiting for air travel to tick up some more.

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A recent bullish piece on India by MS.  They are arguing for corporate earnings to compound 20-25% p.a. over the next 4 years.  
 

Their reasoning:

 

1. The policy intent has clearly shifted from boosting consumption via transfers to boosting growth via investments. Policymakers have been initiating reforms for a while now and we believe that the economy is now in a good position to reap the cumulative benefits from past reforms 


2. Macro stability indicators – which are symptoms of a weak productivity dynamic – are in good shape.


3. With deleveraging headwinds now behind, the global demand environment will turn much more supportive.
 

“The India story stands out now, not only from an absolute perspective but also from a relative perspective, because of this rise in the ratio of corporate profit to GDP. Our strategist for India, Ridham Desai, has been pointing out the fundamentals that will drive rising corporate profits. He notes that “with nascent signs of capex, supportive government policy for higher corporate profit share in GDP and a robust global growth outlook, India seems well placed to enter a new profit cycle. For an economy that is likely to grow at a nominal rate of 10-12% per annum, if the profit share in GDP hits 3.5% over the next five years, it gives us an annual compounded growth in earnings of ~25% for the broad market. Indeed, higher profits feed into real GDP growth and back into profits so a virtuous cycle unfolds with concomitant positive impact on share prices."

 

They explore some of the issues over the last 10 years,  sound familiar? Worth a read over the weekend, enjoy.

india - on the cusp of a virtuous cycle.pdf

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4 minutes ago, nwoodman said:

A recent bullish piece on India by MS.  They are arguing for corporate earnings to compound 20-25% p.a. over the next 4 years.  
 

Their reasoning:

 

1. The policy intent has clearly shifted from boosting consumption via transfers to boosting growth via investments. Policymakers have been initiating reforms for a while now and we believe that the economy is now in a good position to reap the cumulative benefits from past reforms 


2. Macro stability indicators – which are symptoms of a weak productivity dynamic – are in good shape.


3. With deleveraging headwinds now behind, the global demand environment will turn much more supportive.
 

“The India story stands out now, not only from an absolute perspective but also from a relative perspective, because of this rise in the ratio of corporate profit to GDP. Our strategist for India, Ridham Desai, has been pointing out the fundamentals that will drive rising corporate profits. He notes that “with nascent signs of capex, supportive government policy for higher corporate profit share in GDP and a robust global growth outlook, India seems well placed to enter a new profit cycle. For an economy that is likely to grow at a nominal rate of 10-12% per annum, if the profit share in GDP hits 3.5% over the next five years, it gives us an annual compounded growth in earnings of ~25% for the broad market. Indeed, higher profits feed into real GDP growth and back into profits so a virtuous cycle unfolds with concomitant positive impact on share prices."

 

They explore some of the issues over the last 10 years,  sound familiar? Worth a read over the weekend, enjoy.

india - on the cusp of a virtuous cycle.pdf 447.35 kB · 0 downloads

thanks nwoodman

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  • 1 month later...

1. FWIW, MS India snapshot attached. Air traffic continues to pick up.

 

“We expect recovery to gather further strength from 1Q22 as we expect vaccination rates to reach a critical mass by early next year, which will help in broadening the recovery, and external demand conditions remain supportive. As such we expect growth at 10.3% in F2022 and 7.8% in F2023. Risks to growth outlook are balanced and stem from Covid-19 management / pace of reaching full vaccination, continued supply side disruptions which weigh on both growth and inflation negatively.

 

2. A short article on Akasa, India’s new low cost carrier based at Fairfax’s Bangalore Airport.  They just pulled the trigger on 72 Boeing 737 Max at the Dubai Airshow. 
 

https://www.businessinsider.com.au/ultra-low-cost-airline-akasa-air-entire-aviation-segment-2021-11?r=US&IR=T

india_20211121_0000.pdf

Edited by nwoodman
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