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| India most attractive stock market for asset allocation: Macquarie |
| Press Trust Of India / New Delhi Feb 13, 2009, 00:19 IST |
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India is the most attractive stock market in terms of asset allocation in a portfolio due to the current lucrative valuations and the recent government measures to boost liquidity in the economy, says global research firm Macquarie.
“In terms of countries, our top pick is India. In our view, the risk and reward trade-off for India is now much improved. Besides, recent events have significantly eased concerns such as high valuations, bullish earnings forecasts, among others,” Macquarie Research said in a report.
“Valuations in India are now much more reasonable than they have been for some time ... Most interestingly, India is now trading at a discount to Asia ex-Japan, something it hasn’t done on a sustained basis since 2001,” Macquarie said, adding that the current earnings expectations are no longer outrageously optimistic.
Meanwhile, the response from policy-makers has also been impressive. Since mid-September, the Reserve Bank of India has cut repo rate and cash reserve ratio by 350 and 400 basis points respectively, while the reverse repo rate has been cut by 200 basis points in a month, the report said.
As per the firm’s outlook for economic growth in 2009, China, India, Indonesia and the Philippines would see meaningful growth, while Hong Kong, Singapore, Korea and Taiwan are likely to see large contractions.On the back of initiatives taken by the government, growth rate of India is unlikely to be a disaster, it said.
Macquarie Research India economist Rajeev Malik expects the economy to grow 5.5 per cent this year, making it the second strongest economy in Asia (and probably the world).
In striking contrast, the global growth dynamic would remain weak for virtually all of 2009. Fiscal policy may provide some temporary excitement, but a sustained turnaround in global growth will not occur until late 2009.
Hong Kong, Singapore, Korea and Taiwan are all expected to see GDPs contract this year, while India and China are expected to grow only 5.5 per cent and 7.0 per cent, respectively, it said.
Macquarie further said that though the weakness in domestic demand in the developed world has dampened the export cycle of Asia, every country in Asia except India is now seeing exports contracting in year-on-year terms.
“We have recently downgraded China to an underweight (from an overweight) due to growing concerns over the outlook for earnings, investor fund flows and policy,” Macquarie said.
“We remain underweight on Korea and Taiwan. These are the two markets where the earnings and balance sheet destruction are likely to be most severe in the near term and in Korea, valuations are far from compelling,” it added.
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