The Reserve Bank should focus on making liquidity easier rather than cutting rates if the intent is to drive growth, Axis Bank's chief economist Neelkanth Mishra said on Tuesday. Mishra, who is also a part-time member of the Economic Advisory Council to the PM, said the rate cut announced earlier this month or even the subsequent ones if they were to come will not end up increasing borrowings as the scarce liquidity will hamper transmission.
In the near term, the key driver will still be the government's fiscal spending.
UBS stepping in to save Credit Suisse with a $3.2-billion acquisition has provided the beleaguered Swiss bank's India employees a glimmer of hope. The surprise deal - engineered by the Swiss government - has triggered optimism of fewer job losses at Credit Suisse's India unit and better synergies at key verticals, such as wealth management and investment banking. "UBS is a much stronger hand. Coming within its fold will give Credit Suisse's wealth management and investment banking divisions a good home.
The government on Wednesday reconstituted the Economic Advisory Council to the Prime Minister (EAC-PM) under existing chairman Bibek Debroy, for a period of two years. V Anantha Nageswaran has been dropped, Rakesh Mohan (former deputy governor of RBI), Poonam Gupta (director general of NCAER) and TT Ram Mohan (professor, IIM Ahmedabad) have been appointed as part-time members of the reconstituted EAC-PM. The other part-time members of the Council include Sajid Chenoy, Neelkanth Mishra and Nilesh Shah.
The failure of SVB was due to idiosyncratic reasons, but shows how higher rates can expose fault lines in unforeseen places, observes Neelkanth Mishra.
These unicorns, or startups valued at over USD 1 billion, are across industries, beyond technology and tech-enabled sectors as well, like pharmaceuticals, and consumer goods, Credit Suisse India equity strategist Neelkanth Mishra told reporters in Mumbai.
After several years of downgrades to the country's medium-term growth outlook, the estimates are likely to be upgraded now, Credit Suisse said in a report. The country's economy is showing signs of bottoming out, it said. According to the report, the consensus forecasts of GDP growth for FY2022 over FY2020 stopped falling after October 2020 (currently at (-) 1 per cent). Analysts at Credit Suisse expect these estimates to be revised upwards.
The purchase or construction of houses by large numbers of people can add meaningfully to India's economic growth, points out Neelkanth Mishra.
Swiss brokerage Credit Suisse expects the economy to continue to show positive surprises and record up to 9 per cent growth in the next fiscal. For the current financial year too, the brokerage anticipates growth to be higher than the consensus forecast of 8.4-9.5 per cent, and printing in at around 10.5 per cent. As a policy, Credit Suisse does not provide absolute growth numbers in its forecast.
The Sensex is likely to rule between 13,200 and 14,400 points and the rupee may touch Rs 54-55 by June next, Credit Suisse India has said in a report.
Rumours in the bureaucracy on his successor include the names of Sajjid Chinoy of JP Morgan, Rathin Roy of the National Institute of Public Finance and Policy, Neelkanth Mishra of Credit Suisse and the principal economic advisor, Sanjeev Sanyal.
'With the June quarter GDP shrinking by nearly a quarter, there is an even greater economic imperative: Reduction of uncertainty,' observes Neelkanth Mishra.
Will 2022 be a year of contrasting narratives -- one filled with caution and the other with continued optimism?
'For those looking at forward-looking signals for the economy from the stock markets, the relative performance of small and mid-caps may be a better indicator of the future than the index levels of the narrower and more popular indices', says Neelkanth Mishra.
While analysts remains overweight on financials, property, discretionary, industrials and materials, they maintain a neutral stance on pharma, telecom and energy; and underweight on staples, utilities, and IT services.
'Our preference remains for the less-expensive industrial stocks, which are showing good earnings momentum.'
Citing the impact of the second wave of the pandemic over the economy and consumer sentiment, Swiss brokerage Credit Suisse has lowered its nominal GDP growth forecast by 150-300 bps to 13-14 per cent, but expects a stronger recovery in the second half as it sees the lockdowns having limited impact on tax collections. Last month, Neelkanth Mishra, the co-head of equity strategy for Credit Suisse Asia Pacific, and India equity strategist, had told PTI that he expected the real GDP to fall to 8.5-9 per cent in FY22 due to the more severe pandemic attack. The virus case load has crossed the 25-million mark, death toll from the same is nearing 2.9 lakh mark, which is one of the highest in the world as the test positivity rate has been around 15 per cent for long.
In prior elections, not only have opinion poll forecasts been very different from the results, the error margin has increased over time. One need only look at the charts that show the Sensex half a year before and after the results day for the last six elections. The markets did not change direction in any, says Neelkanth Mishra.
GST rate cut for real-estate, income transfer scheme, farm loan waivers execution and recapitalisation of PSU banks have the potential to boost India's growth in a few months, says Neelkanth Mishra.
Indian equities are no longer cheap vis-a-vis global markets, and only a short distance away from being the most expensive they have ever been.
The best of India's brains are instead busy solving the world's problems (I deliberately exaggerate a bit to drive home the point), as our policies incentivise them to do so.
For the sake of transparency, and to reduce undesirable bond market volatility, clarity on these would be welcome, preferably before the budgets for the next fiscal year get finalised, says Neelkanth Mishra.
Given the concerns around trade wars that threaten to jeopardise global capital flows as well, attracting foreign capital needs to be a policy priority, says Neelkanth Mishra.
At a pre-Budget meeting, the FM was asked to ensure that NBFCs come out of the liquidity crisis they are facing with the help of RBI. They also spoke about the futility of trying to achieve a 3 per cent fiscal deficit target over the medium term.
13 eminent economists, including former RBI governor Raghuram Rajan and current International Monetary Fund Chief Economist Gita Gopinath, in a report have asked the political establishment not to resort to populist tricks.
Stick to export-focussed plays, large-caps, say analysts
Experts say the market is more bullish on the BJP as it will ensure continuity in policymaking.
The improving earnings and economic outlook has titled the scales back in favour of Indian equities this year, reports Pavan Burugula.
The next key battle the market will watch out for will be in Congress-ruled Karnataka
Some may lose competitiveness due to higher compliance costs
The RBI fell short of pumping Rs 150 billion into the economy at the beginning of 2018-2019.
FIIs hold as much as 27 per cent in the over $1.6 trillion Sensex market capitalisation as of the September quarter, which is at a historic high.
The PM-elect wants to fix the coal sector; cut coal imports by boosting output.
Spotlight likely on cement, metals, road cos
While companies having fewer visa holders in the US seem to be less exposed to rising protectionism, most front-line IT stocks are trading at attractive levels and, to a large extent, factor in near-term headwinds.
The event will be significant for the Congress and Trinamool Congress leaderships, cementing the proximity during the winter session of Parliament.
Double tax exemption on wages paid to women can encourage companies to hire, retain and compensate women better, argues Nitin Pai.
So, what does 2016 have in store for the Indian markets? Will they be able to take a giant leap forward in the leap year, and what are the key risks?
In refusing to accept its failure, the government has sowed the seeds of further damage: by keeping India short of cash; reducing the headroom for responses to seasonal spikes in cash demand; and increasing the chances that groups will panic at temporary cash shortages, says Mihir Sharma.
Foreign investors keeping off; inflows into bonds also likely to improve if RBI resumes rate cuts.
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