Emerging Trends: Stocks, Sectors & Styles

December 1, 2024

KEY THEME: Sell India - slowing down and fully priced in...

A. ECONOMICALLY, INDIA IS A GOOD STORY

1. Young and rapidly growing working-age population, supporting sustained economic growth, is a notable standout among the largest Emerging Markets

2. Big hopes were driven by the much needed infrastructure build out

3. Fiscal balances were improving

4. Corruption was declining

5. And more...

B. BUT ... TREES DON'T GROW TO THE SKY

1. GDP growth slows to 5.4% in Q3 2024 - dramatic slowdown

• sluggish manufacturing and mining contributed to the weaker performance
• India's infrastructure output dramatically slowing down

2. India's retail inflation rose to 6.2% - due to escalating food prices

• urban wages contracted, impacting middle class

3. Remittances to India took a leg down

C. AND ... THE INDIAN STOCK MARKET HAS ALREADY HEAVILY PRICED IN A LOT OF GOOD NEWS

1. At 22x P/E...The Indian Stock Market is the most expensive Stock Market globally

2. Sell on India Equities since Aug 5, 2024

3. Outflows from Indian Equities into China, US Energy and Argentina

• higher energy prices are also a marginal negative for Indian economy
• BTW, this year, defining low expectations, the Argentinian stock market is +63% in USD!

4. Indian bonds don't offer any real return - inflation is comparable to nominal yields

5. Some Sells on Indian leading companies: ITC, Hindustan Unilever, Nestle India

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