Latest news with #HariShyamsunder
Mint
a day ago
- Business
- Mint
Escalating Israel-Iran conflict to keep markets on boil in near term
Global markets, including India's benchmark indices, have been rattled by escalating geopolitical tensions as Israel launched airstrikes early Friday targeting Iran's nuclear and military infrastructure. The strikes reportedly came in response to Iran being on the brink of developing nuclear weapons, amplifying the instability across West Asia and fuelling fears about oil prices remaining stubbornly high. The Israel-Iran conflict has sent Brent crude prices soaring above $75 a barrel, stoking fears of inflationary pressure driving up input costs and threatening the profitability of Indian companies. Brent crude surpassed $78 per barrel on Friday before retreating from its peak. Still, prices have surged 8% over the past two sessions. Market participants are also worried that the intensifying conflict could force the Reserve Bank of India to hit the brakes on more rate cuts or abandon them altogether. RBI has gradually cut its policy repo rate from 6.25% at the beginning of this year to 5.5% recently, its lowest since August 2022, as it seeks to spur economic growth after years of focusing on keeping inflation under check. Also read | The Reserve Bank's leap of faith: A big rate cut is very hard to justify According to Madhavi Arora, chief economist at Emkay Global Financial Services, 'every $10 per barrel increase in oil leads to an annualised gain of 35 basis points in CPI (consumer price index-based) inflation". Amid rising uncertainty, investors are making a beeline for traditional safe havens like gold, with the yellow metal up 4% in the past two sessions, crossing the crucial Rs1 lakh-mark on Friday. The 10-year-bond yield remained largely flat on Friday, inching up 1 basis point to 6.36%. However, the rupee weakened in early trade, with experts pointing to interventions by RBI to stem losses. Rupee closed at 86.09 per dollar, down 49 paise. This, in turn, has sparked a broadbased sell-off in Indian equities. Indian markets currently offer limited margin for error with modest earnings growth and pockets of sharply elevated valuations, said Hari Shyamsunder, vice president and senior institutional portfolio manager–emerging markets equity–India, Franklin Templeton. The rising geopolitical risks could push up commodity prices, stoke inflation, and 'trigger a broader risk-off sentiment", he added. 'While not yet a structural threat, such developments could temporarily cap the recent rally in Indian equities." Next rate cut in October—'if at all" On Friday, both the Nifty 50 and the S&P BSE Sensex closed 0.7% lower, ending at 24,718.60 and 81,118.60 points, respectively. Since Thursday, both benchmarks have declined by around 2%. The Nifty Midcap 100 and Nifty Smallcap 250 declined by 0.4% each. Sectors that contributed the most to Friday's losses were financial services, oil and gas, and fast moving consumer goods. India VIX, also known as fear gauge, jumped 8% on Friday, indicating increased volatility. Geopolitical risks mostly lead to sharp, short-term falls followed by recoveries for markets, said market expert Ajay Bagga, adding that oil supplies link is a big risk to Indian markets apart from a global risk-off that could see selling by foreign portfolio investors (FPIs). Bagga said he hoped the impact of the Israel-Iran conflict on the markets will be short-lived but cautioned that any existential threat to the Iranian regime could lead to attacks on US and Gulf Cooperation Council assets in the region, which might increase volatility in markets. That said, RBI is on pause mode given the shift to neutral from an accommodative stance. Bagga believes the next rate cut by the central bank will now be in October, 'if at all". Also read | India to benefit from foreign inflows, stock-specific approach better, says Yogesh Patil of LIC AMC The 10-year-bond yield remained largely flat on Friday, inching up 2 basis points (bps) to 6.36% at 3:28 pm. However, the rupee weakened in early trade, with experts pointing to interventions by RBI. Sriram Iyer, senior research analyst at Reliance Securities, said that after the rupee tumbled to an eight-week low in Friday morning trade amid rising geopolitical tensions, rising crude oil and trade uncertainty, dollar sales from RBI capped further losses. Although RBI does not target any level of the currency, it intervenes to curb excessive volatility. The rupee has depreciated by 1.6% since early May amid rising crude oil prices and volatile FPI flows, per Care Ratings. Since January, the rupee has remained broadly flat while most other currencies have gained against the US dollar. Also read | What drives the new corporate love for bond market Global market chaos All things considered, the escalating conflict in West Asia amid mounting expectations of a robust Iranian retaliation has weighed heavily on US futures and Asian and European markets, dragging them lower. US Dow futures are down over 500 points while France's CAC 40 was down 1.1% and Germany's DAX dropped 1.4%. Japan's Nikkei, China's Shanghai Composite, South Korea's Kospi and Taiwan Weighted—all fell by around 1% each. Hong Kong's Hang Seng was down 0.6% while Singaporean Strait Times slipped 0.3% on Friday. Shortly after the strikes began on Friday, US Secretary of State Marco Rubio issued a statement describing Israel's move as a 'unilateral action' and cautioned Iran against retaliating against the US. JP Morgan said in report dated 12 June that market attention is focused on the risk that an escalation in the conflict could lead to the closure of the Strait of Hormuz—a crucial sea passage in the Persian Gulf—or trigger broader retaliation from major oil-producing countries in West Asia, which together account for a third of global oil output. Under such a severe outcome, oil prices could 'surge to the $120-130/bbl range", it added. Also read | Global equity markets not pricing in a severe downturn just yet, says Nomura's Karkhanis Ashish Gupta, chief investment officer at Axis AMC, said that such geopolitical uncertainty is generally 'an antithesis to buoyant markets", and cautioned that risks to global trade are likely to weigh on corporate earnings. 'Investors in this environment, where there is economic and geopolitical uncertainty, would ask for higher risk premium," he added. According to Gupta, key triggers in the near term could be further geopolitical developments and how the global tariff landscape unfolds. On the tariff front, he said extreme outcomes are unlikely for now, suggesting that much of the downside risk may already have been priced in.
Time of India
15-05-2025
- Business
- Time of India
Mid & smallcaps may outpace largecaps on back of India's growth texture: Hari Shyamsunder
There are a lot of new ideas coming. While we do not participate in all of the IPOs, they are a pool of ideas which we keep coming back to and I think that that is what keeps the Indian markets interesting. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads "Over the last 20 years it has gone from 4% to 20%, 4% to 12% to 20%. So, now, if you maybe 28% even in the next 10 years, then the rate of growth definitely has been slowing down. So, we need to keep that in mind," says Hari Shyamsunder So, on the IT side, we are mostly well neutral. We are a bit mixed on that and the reason we are mostly neutral is we see both sides of that argument really. So, on the largecap IT if you look at the size of our IT companies now, the IT exports from India are close to about 20% of global IT spends now. In terms of headcounts, we are about 35% to 40%. So, we are not small by any stretch of the last 20 years it has gone from 4% to 20%, 4% to 12% to 20%. So, now, if you maybe 28% even in the next 10 years, then the rate of growth definitely has been slowing down. So, we need to keep that in the same time, we have seen headwinds coming from the GCC side where the global capability centres have been ramping up in India and that is acted as a bit of a headwind for the IT companies as well and at the same time put into all this mix we have seen that AI is a bit of a wild card in terms of what kind of impact there can be, the impact we can see kind of benefits, the kind of new use cases that can come up are a bit harder to envision. So, it is a bit of waiting for some of those to become a bit clearer while we can immediately see some of the impacts which are coming on the debate between large, mid, and smallcaps, we have been acknowledging that largecaps had become cheaper at least. The most recent rally has taken it up now maybe to one standard deviation above long-term averages again. But what we would note is that over the next three to five years we continue to believe that given the drivers of the economic growth in India, just the texture of that would tend to benefit mid and smallcap earnings over this while mid and smallcaps might be expensive and they are continuing to be above the long-term averages, we know that we cannot exclude them completely. If you are going to look at Indian growth story, if you are going to look at the Indian opportunities which are coming out, then the mid and smallcap need to continue to be a part of the we have not moved into a camp which just completely throws out the mid and smallcaps and says that that is completely uninvestable. Instead, we continue to look for opportunities. As I said, looking particularly where maybe valuations have become cheaper for some of the maybe not sound reasons in the long term, maybe there are some short-term reasons why the stocks have corrected and we are looking to pick them so that is really the big debate or it is a big challenge because the valuations are not cheaper by any stretch of imagination. So, it is something which we have been struggling with as well. The opportunity is kind of clear in some cases. Some of it is, as you said, there is a bit of a story, of course, a narrative which has been built and the numbers are not yet as in these cases again we have been looking for better levels and while they were approaching better levels, before we could act on them decisively enough maybe the stocks have moved up very sharply. But manufacturing you need to look at it directly in terms of some of the sectors which have been mentioned, but there are still continuing to be industrial product companies, for example, where we still own certain are certain ancillary associated with manufacturing kind of stocks which we can look at instead of looking directly at some of the headline names. But you are right the challenge here is that valuations have become pretty stretched here and so we will need to get lot more conviction on the visibility of the numbers before we wade into them with a lot more I said this is a market which is going to favour stock picking. So, we like our chances here in this kind of a market where it is down to the skills of fund manager in terms of picking the over this period as a market we should still be looking at the range of, let us say, about 10% to 13% for the largecaps at least and well, mid and smallcaps we are starting off from that the markets Across the board broader markets itself should be in this kind of a range compounding at 10% to 13% over the next three-five years. So, that is the kind of expectation which we should bake in given where the valuations are today. Within this, of course, there is a lot of new stocks which are coming up. Just note that over the last couple of years we have seen a lot of stocks being listed, about 150 odd in the main board at Indian stock markets are very dynamic. There are a lot of new ideas coming. While we do not participate in all of the IPOs, they are a pool of ideas which we keep coming back to and I think that that is what keeps the Indian markets interesting.
Time of India
15-05-2025
- Business
- Time of India
Global macro uncertainty creating pockets of opportunity for India: Hari Shyamsunder
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads "It has led to certain slowdown whether it is on the investment side, it led to certain pick up in consumption in terms of front ending of consumption at least in the US markets for sure," says Hari Shyamsunder So, over the last 45 days or so, we have gone through a lot of noise in the markets and some of that noise is definitely settling down now whether it is on the tariff front or whether it is on the border as well, we have seen a lot of noise around some of the news coming out of there. But now that some of that dust is settling is back to looking at the numbers which are coming out. The Indian markets have been in a correction since September of last year and some of the reasons why the correction started have not yet been fully addressed whether it is a slowdown in economic momentum or whether it is the earnings being cut pretty sharply last year for FY25 in of those still are being fleshed out. So, I think that is where we are. We are back to looking and focusing intensively on the numbers which are coming out, particularly the quarterly numbers and we are looking for the trends coming out of the end of FY25 and trying to get some signals as to what that means for the next year as well.I think which way you cut it, it looks like some of the impact of the tariff wars is going to be negative at the margin at least. So, it has led to certain slowdown whether it is on the investment side, it led to certain pick up in consumption in terms of front ending of consumption at least in the US markets for what this has just meant is that the overall uncertainty and the price increases are not good for consumption on the US markets. In addition, what we have seen is that generally all-around uncertainty has not fared well for the overall markets. But if we look past some of these, then Indian markets do stand to gain in some parts at have seen I mean, some news on the electronic side, on the mobile phone side of companies looking to shift some of the supply chains to India some cues from there and get a bit more positive on some of the opportunity which could emerge as a result of some of the global turmoil which is happening. India has not been really too great on manufacturing, in terms of percentage of GDP at have lagged our neighbours and some of the other emerging markets. This could be a good time for us to cover up some of that gap at the way to really look at it is that that we need to look at the trends and how this has been shaping out over the last few quarters. Post Q2 we saw a sharp cut in the earnings for the markets. And if you look at the kind of beats to downgrades really, what we have seen is that now at least the beats to misses at least has been a bit more stable in this quarter, that is really the best I can speak about this what we have also seen is that the upgrades to downgrades are still not looking really favourable. What that means is that for next year the earnings continue to be cut. FY26 earnings are continuing to be in FY25 we saw a sharp cut. We were expecting at the start of the year about 15% growth , that is landing up in maybe a high-single digits. Now going into FY26 we started off with that kind of an expectation again and at least heading into it at the start we are front ending the cuts which means that well, as long as the earnings are continuing to be cut and pretty sharply in some cases, what that mean is that it could serve as a lid for the it continues to be the earnings. I mean, the earnings momentum has not really picked up. Well, we can say that the economic momentum has bottomed out. We have seen enough signs of that in the Q3 numbers, and the Q4 will also continue to affirm that expectation that the economy at least is bottoming on the earning side what we are seeing is that well it has bottomed out, but the economic momentum is not as strong as we would like to see it. Across the sectors if you look at it, we are getting into a market which is very bottom up. We are finding ideas in sectors, but broad theme are a bit harder to come by. It is really getting down to stock selection in each of the is a great question and unfortunately, the answer is going to be very selective because we can go across sector by sector and it is hard to find broad sectors which are very part which we do think still offers relative value continues to be the private banks and that is one place where we are positive and overweight other places what we have been looking at is doing a bit of growth adjustment on the longer term. So, whether it is something like a consumer services, there we have been adopting an approach of looking at where there is a bit of temporary disappointment on the numbers and those are the kind of opportunities which we are then looking to lap up because over the longer term we are pretty clear that the Indian consumer is changing its habits, it is moving more towards consumer services to more towards consumer discretionaries and what that means is that that offers up opportunity if you look past the near-term, short-term it is really about identifying growth in this market where you are more confident about shifting growth patterns rather than maybe just looking to hunker down purely into value.
