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Economic Times
03-07-2025
- Business
- Economic Times
India to benefit from global manufacturing shift as China+1 strategy gains momentum: Ankur Jhaveri
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel In this edition of ETMarkets Smart Talk, Ankur Jhaveri , MD & CEO of JM Financial Institutional Securities Ltd., highlights how India stands to benefit from the evolving global manufacturing landscape, driven by the China+1 global companies look to diversify supply chains away from China, Jhaveri believes this structural shift presents a multi-year opportunity for also shares insights on key macro risks, sectoral valuations, policy expectations, and why rural consumption and domestic manufacturing are likely to be the twin growth engines in the coming quarters. Edited Excerpts –A) There has been a series of events in June that got investors glued on to emerging geopolitical dynamics. June has certainly been more nervous compared to May and immediate investment strategies seems to be rather said that it's not only geopolitical situation but also an expression of recent earning season that has impacted market volatility. Corporate commentary by large has been cautions, which has forced investors to re-calibrate their earning projects and multiples.A) Global environment continues to remain fluid since the change of US President. Tariffs, Monetary policy reaction, and geopolitical conflicts are driving market sentiments forward unfolding geopolitical events and finalisation of trade deals would be the key monitorable events from the market policy flip flops or further postponement of the tariff deadline would be negative for the US Dollar and hence should attract flows towards Emerging Markets.A) Global manufacturing is undergoing a shift, and the recent policy actions be it fiscal or monetary are all targeted towards benefiting the domestic manufacturing players have been diversifying their manufacturing capacities away from China, although other countries would also benefit from this shift, India too stands to gain. This is a multiyear theme and companies in the manufacturing supply chain will be the in the immediate near term we see that the conditions are aligned in favour of consumption. Easy monetary policy, Favourable weather conditions - onset of La-Nina condition and Fiscal measures like recent Tax exemption would all improve consumption demand in the domestic economy - especially rural.A) Geopolitical conflicts seem to be broadening with every passing day, its impact on crude oil depends on the incremental steps taken by these countries in be specific, the entry of US in the Iran-Israel conflict complicates the issue further, the extent of retaliation by Iran will have serious implications on Crude oil price. Brent crude price is already up 22.9% in June, Iran's decision to block the Strait of Hormuz would further fuel the imports form one fourth of India's total imports and out of 5.5 Mn Barrels per day (bpd) imports of crude oil currently, 2 Mn bpd is sourced through the Strait of its impact could be cushioned meaningfully if crude oil imports are diversified from Russia, which does not use this corridor to supply oil. We believe that proactive monetary and fiscal policies should support growth in the current fiscal, hence 6.5% growth seems achievable which should reflect in corporate earnings as well.A) Banks provide margin of safety on the valuation front, while other sectors appear to be fully priced or trade above the historical valuation should not be the only criteria in an investment decision, considering the global uncertainty in which these businesses are believe bottom up approach would be suitable in current macro environment, companies with decent earnings visibility trading at reasonable valuation would be preferred.A)It is worth highlighting that the comfortable inflation trajectory has allowed the global central banks to ease policy rates. However, it is the tariffs and the related disruption which would decide the inflation path going forward, especially in the US.A) The domestic inflation trajectory is expected to remain comfortable in the near term, which would allow the RBI to focus on growth, the governor indicated that the central bank is targeting a potential growth rate of 8%.Moreover, Governor Malhotra recently hinted that if the inflation outlook turns out to be below RBI's projection, it will open up more room for policy according to us is preparing the markets for more policy easing, however at this juncture we believe that the space for incremental policy easing if any would be restricted to the recent front-loading of rate cuts, we believe that RBI intended to deliver a positive shock to the economy which would eventually fasten the rate transmission, the advance announcement of the CRR cut was to cushion the Banking NIMs to some believe that a pickup in consumption is imminent once global shock settles and impact would be visible with a lag of a quarter or two.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Time of India
03-07-2025
- Business
- Time of India
India to benefit from global manufacturing shift as China+1 strategy gains momentum: Ankur Jhaveri
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel In this edition of ETMarkets Smart Talk, Ankur Jhaveri , MD & CEO of JM Financial Institutional Securities Ltd., highlights how India stands to benefit from the evolving global manufacturing landscape, driven by the China+1 global companies look to diversify supply chains away from China, Jhaveri believes this structural shift presents a multi-year opportunity for also shares insights on key macro risks, sectoral valuations, policy expectations, and why rural consumption and domestic manufacturing are likely to be the twin growth engines in the coming quarters. Edited Excerpts –A) There has been a series of events in June that got investors glued on to emerging geopolitical dynamics. June has certainly been more nervous compared to May and immediate investment strategies seems to be rather said that it's not only geopolitical situation but also an expression of recent earning season that has impacted market volatility. Corporate commentary by large has been cautions, which has forced investors to re-calibrate their earning projects and multiples.A) Global environment continues to remain fluid since the change of US President. Tariffs, Monetary policy reaction, and geopolitical conflicts are driving market sentiments forward unfolding geopolitical events and finalisation of trade deals would be the key monitorable events from the market policy flip flops or further postponement of the tariff deadline would be negative for the US Dollar and hence should attract flows towards Emerging Markets.A) Global manufacturing is undergoing a shift, and the recent policy actions be it fiscal or monetary are all targeted towards benefiting the domestic manufacturing players have been diversifying their manufacturing capacities away from China, although other countries would also benefit from this shift, India too stands to gain. This is a multiyear theme and companies in the manufacturing supply chain will be the in the immediate near term we see that the conditions are aligned in favour of consumption. Easy monetary policy, Favourable weather conditions - onset of La-Nina condition and Fiscal measures like recent Tax exemption would all improve consumption demand in the domestic economy - especially rural.A) Geopolitical conflicts seem to be broadening with every passing day, its impact on crude oil depends on the incremental steps taken by these countries in be specific, the entry of US in the Iran-Israel conflict complicates the issue further, the extent of retaliation by Iran will have serious implications on Crude oil price. Brent crude price is already up 22.9% in June, Iran's decision to block the Strait of Hormuz would further fuel the imports form one fourth of India's total imports and out of 5.5 Mn Barrels per day (bpd) imports of crude oil currently, 2 Mn bpd is sourced through the Strait of its impact could be cushioned meaningfully if crude oil imports are diversified from Russia, which does not use this corridor to supply oil. We believe that proactive monetary and fiscal policies should support growth in the current fiscal, hence 6.5% growth seems achievable which should reflect in corporate earnings as well.A) Banks provide margin of safety on the valuation front, while other sectors appear to be fully priced or trade above the historical valuation should not be the only criteria in an investment decision, considering the global uncertainty in which these businesses are believe bottom up approach would be suitable in current macro environment, companies with decent earnings visibility trading at reasonable valuation would be preferred.A)It is worth highlighting that the comfortable inflation trajectory has allowed the global central banks to ease policy rates. However, it is the tariffs and the related disruption which would decide the inflation path going forward, especially in the US.A) The domestic inflation trajectory is expected to remain comfortable in the near term, which would allow the RBI to focus on growth, the governor indicated that the central bank is targeting a potential growth rate of 8%.Moreover, Governor Malhotra recently hinted that if the inflation outlook turns out to be below RBI's projection, it will open up more room for policy according to us is preparing the markets for more policy easing, however at this juncture we believe that the space for incremental policy easing if any would be restricted to the recent front-loading of rate cuts, we believe that RBI intended to deliver a positive shock to the economy which would eventually fasten the rate transmission, the advance announcement of the CRR cut was to cushion the Banking NIMs to some believe that a pickup in consumption is imminent once global shock settles and impact would be visible with a lag of a quarter or two.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Mint
28-04-2025
- Business
- Mint
Expert View: Ankur Jhaveri of JM Financial on trade war impact, India vs China, strategy for Indian stock market & more
Expert view: Ankur Jhaveri, MD & CEO, Institutional Equities at JM Financial Institutional Securities Ltd., believes a major trade war could impact the Indian economy, but domestic consumption could restrict the overall impact. In an interview with Mint, Jhaveri shared his views on the stock market strategy, sectors he is positive about and key triggers for the market. Here are edited excerpts of the interview: When you restrict the largest global suppliers from accessing US markets, the world (except the US) should be prepared for a deflationary cycle, which will benefit consumers but negatively impact domestic players. The second and third-order impacts would be difficult to fathom at this stage. We see a risk to growth through the trade route, as exports have already been weak (0.1 per cent YoY in FY25). A deterioration in India's trade balance would also drag GDP in FY26 (less than 6.5 per cent growth). Moreover, India is highly unlikely to increase its exports to the US. On the other hand, domestic consumption could see some meaningful uptick in India, thus restricting overall impact and proving to be a great hedge for investors in these uncertain global markets. To some extent, yes, with the 'Make in India' and PLI scheme already in place, India could leverage its dependable position and relatively better corporate governance at the country level versus China to build on its manufacturing dream/idea. However, India still lacks scale and ease of doing business compared to China, which would act as an impediment. I believe India would be an option when the existing trend of diversifying supply chains away from China gains further pace. In the long run, market gains are a function of earnings. I still see some room for cutting earnings estimates that align with the consensus. That should lead to higher single-digit earnings growth in FY25, which was reflected in the nearly 4.5 per cent returns in the Nifty in FY25. For this year, considering the heightened uncertainty around tariffs and the likely deflationary pressures due to dumping by Asian countries in the upcoming years, markets should be prepared for increased competition-led moderate earnings. However, Indian markets could gain from the flux of sudden liquidity, especially from foreign investors, given their positioning as a hedge in this trade war with relatively favourable macroeconomics. In a risk-off environment, equities trading at rich valuations should be avoided. However, within the equity portfolio, we would position more towards large caps with valuation comfort versus mid and small caps. Allocation to SMIDS (small and mid-caps) would be tactically towards companies with earnings visibility. Moreover, considering the current geopolitical landscape, I would prefer companies catering to domestic demand and being a segment leader. Central banks have been the biggest buyers of gold in the last three years as they diversified away from the US dollar. As per the World Gold Council, 2024 is the third consecutive year in which demand from central banks surpassed 1,000 tonnes, far exceeding the 473 tonnes annual average between 2010 and 2021. Global uncertainty remains elevated and is expected to remain so at least until the tariff issue is resolved, so demand for the safe-haven asset (gold) is expected to remain strong. However, after a 53 per cent nonstop rally since November 2023, we may see a pause. In the long term, depending on an investor's profile and goals, one should have a fine balance across asset classes. The actual shape and size of Trump's tariffs are not yet clear, so their second—and third-order impact will be difficult to gauge. Apart from tariffs, we believe that earnings growth would be key to monitoring. It would be dependent on domestic consumption patterns and pick up pace. If you can digest the turbulence in the next one to two years, banks will provide the valuation comfort currently, but the impact of rate cuts on the NIMS (net interest margins) should be reflected in this rate-cut cycle. Secondly, despite a conservative growth in capex allocation of ₹ 11.2 lakh crore (10 per cent over FY25RE), I believe ₹ 11.2 lakh crore is a substantial amount. Considering that the capex intensity will likely be strong in FY26, I believe players in this space should continue to benefit. It would continue to play the local consumption story across discretionary names, especially at the higher end of the curve. After the election-induced sluggishness dragged the economy in FY25, economic activity bottomed out in Q2 FY25 (5.6 per cent growth). I see a gradual uptick from here on. However, it would be unrealistic to expect growth in the range of 6.2 - 6.3 per cent in FY25, unlike the government's 6.5 per cent expectation. CPI inflation moderated to 3.3 per cent in March 2025 on the back of moderation in the food category. IMD's above-normal monsoon expectation bodes well for the supply side. The sharp drop in the RBI's inflation projection in Q1 (-90bps to 3.6 per cent) is reflected in the shorter end of the yield curve. Moreover, the RBI expects inflation to be within the 4 per cent target in FY25, which aligns with our house expectation. In the base case, the US negotiates a trade deal with its trading partners, which would ideally lower the duty incidence compared to the reciprocal tariffs imposed currently. Tariff implementation spreads the inflationary impact, at least in H1CY25 (the first half of the calendar year 2025). Moreover, the US Fed Chair Jerome Powell expects the impact to be 'transitory' on the inflation print. I am not in the recession camp. However, a slowdown is a given, considering elevated inflation would negatively impact the economy's consumption spending. Hence, we expect two, max three, cuts by the US Federal Reserve. Since the RBI's guard change, domestic monetary policy has clearly shifted toward addressing growth concerns rather than price stability. Headline inflation has moderated below the 4 per cent mark (3.3 per cent in March 2025), providing further comfort to the MPC's focus on meeting the economy's potential growth by front-loading rate cuts. Our terminal rate expectation as a house is at 5.5 per cent to 5.75 per cent in this rate cut cycle. Read all market-related news here Read more stories by Nishant Kumar Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary. First Published: 28 Apr 2025, 05:38 PM IST
