Latest news with #MSCIEmergingMarketsIndex
Time of India
18 hours ago
- Business
- Time of India
Fund managers bet on bank, consumer stocks after RBI's rate cuts
Asset managers are optimistic about Indian banking and consumption stocks. They anticipate gains from the Reserve Bank of India's rate cuts. These cuts are expected to boost bank profits and consumer spending. BlackRock and Aberdeen are adjusting portfolios accordingly. The RBI's actions aim to stimulate economic growth. Experts believe these measures will positively impact the market in the coming months. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Money managers are betting Indian banking and consumption stocks have further to run this year, benefiting from the central bank's aggressive policy rate cuts to lift economic managers, including BlackRock Inc., Aberdeen Group Plc and Smartsun Capital Pte. have started aligning portfolios on expectations rate cuts will boost bank profits by lowering what they have to pay on deposits, while consumer companies' earnings will improve as customers' take out loans and shift signals monetary policy is shaping to be the key driver of India's $5.4 trillion equity market, which has struggled compared to some of its peers this year due to concerns over corporate earnings and rich macro backdrop for many sectors in India is 'going to improve over the next 12 months' largely due to the central bank's easing, said Prashant Periwal, a portfolio manager for emerging markets equities at BlackRock. 'The more domestic sectors such as financials and discretionary consumption are likely to do better and that is how we kind of are positioning the portfolio.'Periwal's fund holds lenders such as HDFC Bank Ltd., ICICI Bank Ltd. and Axis Bank Ltd., which have all surged at least 10% this year, compared with an 8% rise in the benchmark NSE Nifty 50 Nifty Bank Index hit a fresh record on July 1 after gaining for four straight months, while the NSE Nifty India Consumption Index has advanced 16% since its March low, marginally outperforming the broader gauge. Upbeat first-quarter business updates by companies such as pizzamaker Jubilant Foodworks Ltd. and jeweler Kalyan Jewellers India Ltd. signal room for more of the credit for the rally goes to the Reserve Bank of India — it has injected more than $100 billion of liquidity into the market this year, and its 50 basis points interest-rate cut last month came as a surprise to the market.'RBI's easing is helping bank stocks to outperform and other rate sensitives will also come around to participate in the rally,' said Sumeet Rohra, a fund manager at Smartsun. 'The easing lowers the cost of funds and boosts earnings per share and return on investment which overall leads to rerating of valuations.'India's stock market remains expensive. The broader equity benchmark trades at about 21 times of its one-year forward consensus earnings estimate, compared with about 13 times for the MSCI Emerging Markets Index, according to data compiled by Bloomberg. A shift in RBI's policy stance to neutral also indicates the room for future rate cuts may be More: India's $5.4 Trillion Stock Market Is Slowly Losing Its EdgeBut historical data supports the sense of optimism. The last two times the RBI slashed the rates by half-a-percentage point, in April 2012 and September 2015, the banking gauge beat the benchmark index over the subsequent 12 months. After a 75- basis-points cut during the pandemic in March 2020 both the gauges gave similar RBI's measures 'are steps in the right direction to boost growth, which could be reflected on the ground in the second half of the year,' said Rita Tahilramani, a Singapore-based investment director at Aberdeen. 'We are taking the opportunity in this correction to buy' stocks across sectors, she said.
Mint
09-06-2025
- Business
- Mint
Steady nominal GDP growth will gradually boost India's weight in MSCI EM index, says Morris of BNP Paribas AMC
If India continues to grow its nominal GDP at a low double-digit rate, it will support a gradual increase in its weight in the MSCI Emerging Markets Index, said Daniel Morris, chief market strategist at BNP Paribas Asset Management. India is already the second largest weight in this index, and a further increase in weight will help attract more benchmark funds to the country, he told Mint. Drawing a comparison between China and India in the emerging markets, Morris said that, unlike China, which is more export-oriented, India's growth is powered by domestic consumption, services, and a rising middle class, making it a potential beacon of stability and growth in a volatile global environment. Edited excerpts: How would you describe the current global sentiment? Do you think the tariff wars are behind us now? We will know more in 90 days. Right now, the market seems to appreciate that we have moved into the negotiation phase. The original reciprocal tariffs were never meant to stay high, they were a way to get attention and bring countries to the table, which worked. We have already seen reductions and deals like the one with UK are a start, with others in progress. The US holds a strong negotiating position, as it is the world's largest market and a key destination for global exports. While India is less export-dependent, the leverage still matters. Ideally, we will see a positive outcome: slightly higher US tariffs, but lower ones elsewhere. We will have to wait and see how it plays out. Also read: Andy Mukherjee: Importers hit by Trump tariffs could turn to 'glocal banks' With tensions easing, do you think the expected near-term rate cut might now be pushed back? The Fed (US Federal Reserve) made it clear at the last meeting that inflation is still a concern. Since then, one of the rate cuts that markets had priced in has effectively been pulled back. The most recent CPI data did not yet show much pressure on inflation, so now everyone is waiting to see what happens next month. At the same time, the Fed is also watching growth closely. There is a parallel here to the pandemic. Back then, most forecasts for growth and inflation turned out to be wrong, not because the analysts were off, but because we were in completely uncharted territory. No model could really capture what was happening. It feels similar now. We are in a situation we have not seen before, so we are still flying blind in some ways. Everything depends on how the data plays out, both for growth and inflation and the Fed's response will follow from that. I could make a prediction, but honestly, confidence in any forecast is low right now. It is a very volatile, very data-dependent environment. Where is India placed among global peers in the investment landscape? India has emerged as a top global FDI destination, with inflows rising from $36 billion in FY14 to over $80 billion in FY25. In a multi-polar world and constantly changing geopolitical landscape, India appears to be on the right side of the global bloc, with the potential to benefit from global supply chain disruptions, offering a credible alternative to China. Structural reforms like Make in India, PLI (Production Linked Incentive) schemes, and Ease of Doing Business have strengthened its appeal, positioning India as a long-term investment hub. With a young workforce, growing infrastructure and stable macroeconomic outlook, India is well-placed to attract sustained global capital and play a pivotal role in the evolving multipolar world economy. Also read: RBI rate cuts, fiscal support likely to aid FY26 earnings recovery: Sanjay Chawla of Baroda BNP Paribas MF FIIs seem to have made a comeback. Do you think these foreign inflows into India would continue? Yes, FIIs (foreign institutional investors) have made a comeback in April, supported by India's robust macroeconomic backdrop, easing oil prices, and equity market valuations that have become more reasonable. The recent softness in the US dollar index has also contributed to a shift in global capital flows toward emerging markets, with India emerging as a key beneficiary. The Reserve Bank of India has played a crucial role by building a strong foreign exchange reserve buffer, which helps mitigate currency volatility. We are in a situation we have not seen before, so we are still flying blind in some ways. Everything depends on how the data plays out, both for growth and inflation and the Fed's response. It is a very volatile, very data-dependent environment. With a young workforce, growing infrastructure and stable macroeconomic outlook, India is well-placed to attract sustained foreign investor flows. Indian stock markets' reduced correlation with global markets further translates into superior diversification benefits for foreign investors, which will help India get its rightful share of foreign capital flows. What is your region-wise stance? What is different today is that, honestly, we don't have a clear geographical overweight. Broadly speaking, we still like equities, but it is not obvious which markets outside the US are going to outperform. So we are neutral geographically right now. Normally, we would have a regional tilt, but this is one of those odd moments where it is unclear which markets will lead, and that is partly because there is no extreme divergence in valuations and earnings growth expectations across markets. Also read: Trump says Xi agreed to restart the flow of rare earth minerals. Why are rare earths important for Chinese economy? In the emerging market basket, how do you look at India versus China? India stands out among emerging markets due to its domestically driven economy, which offers resilience amid global uncertainty. Unlike China, which is more export-oriented, India's growth is powered by domestic consumption, services and a rising middle class. This makes India a potential beacon of stability and growth in a volatile global environment. If India continues to grow its nominal GDP at a low double-digit rate, it will support a gradual increase in its weight in the MSCI Emerging Markets Index. India is already the second largest weight in this index and further weight increase will help attract more benchmark funds to the country. The gains in China's equity markets have primarily been driven by a few numbers of stocks in the technology sector; there is a similar concentration as seen in the US 'Magnificent 7' stocks. The returns of these stocks in China reflect the talent and innovation we saw in the DeepSeek announcement, as well as the reaffirmation of the government's support for the sector. We believe the outlook here is more encouraging, while the rest of the market suffers both under the threat of tariffs as well as the weak domestic demand environment. Let's shift to asset classes like gold and silver that have already seen a strong run-up. Do you think it might be time to reduce exposure to precious metals? After the very good performance, we have moved back to neutral on precious metals. We have already seen gold prices pull back a bit as geopolitical tensions have eased, which makes sense. But looking ahead, there are still two key drivers supporting gold. First, some central banks have been reallocating from US Treasuries into gold, something we expect to continue, which should support prices over the medium term. Second, with the ongoing uncertainty around US policy, gold continues to serve as a hedge against unexpected events. So while short-term volatility is expected, the medium-term outlook remains positive. How do you see the dollar moving forward, now that tensions between the two giants are easing? Despite expectations for Fed rates to stay higher, which would normally support a stronger dollar, we have seen it weaken over the past month or so. We think that has been mainly driven by fund flows, with foreign investors reallocating some of their portfolios out of the US into other markets. As we have said before, we are neutral on where exactly that money is heading. The key question now is whether that reallocation has mostly played out. While it is hard to predict, we could see some stabilisation in the dollar going forward.
CNBC
21-05-2025
- Business
- CNBC
Emerging markets are the next 'bull market' as the sell U.S. narrative gains ground
Emerging markets stocks are in the spotlight again as the "sell U.S." narrative gained fresh momentum, following Moody's recent downgrade of the U.S. credit rating. The Bank of America heralded emerging markets as "the next bull market" recently. "Weaker U.S. dollar, U.S. bond yield top, China economic recovery…nothing will work better than emerging market stocks," Bank of America's team, led by investment strategist Michael Hartnett, said in a note. Similarly, JPMorgan upgraded emerging market equities from neutral to overweight on Monday, citing thawing U.S.-China trade tensions and attractive valuations. A dented confidence in U.S. assets, which kicked into high gear last month marked by a selloff in U.S. Treasurys, equities and greenback, has fueled the bullishness for emerging markets. The MSCI Emerging Markets Index, which tracks large and mid-cap representation across 24 EM countries, is up 8.55% year-to-date. This compares against a 1% climb by the U.S. benchmark S&P 500 across the same period. The difference was more stark in the weeks after April 2, when U.S. President Donald Trump unveiled "reciprocal" tariffs on friends and foes alike. While most benchmarks fell across the board in the immediate days after April 2, the week that followed showed a divergence between emerging market equities and U.S. stocks. Between April 9 to 21, the S&P 500 declined over 5%, while the MSCI Emerging Markets Index rose 7%. Even though U.S. equities and Treasurys rebounded slightly since, the recent Moody's downgrade has reignited traders' concerns. On Monday, the U.S. 30-year Treasury yield briefly grazed above 5% to hit levels not seen since November 2023, while U.S. equities also snapped a six-day winning streak on Tuesday. The events that unfolded recently have reinforced the need for more diverse geographical exposure, said Malcolm Dorson, head of the active investment team at Global X ETFs. "After underperforming the S&P over the past decade, EM equities are uniquely positioned to outperform over the next cycle," he added. "This possible perfect storm stems from a potentially weaker U.S. dollar, extremely low investor positioning, and outsized growth at discounted valuations," he told CNBC. According to data provided by Dorson, in terms of positioning, many U.S. investors have just 3% to 5% in emerging markets, compared to the 10.5% in the MSCI Global Index, which captures the performance of large and mid-cap companies across 23 developed markets. Emerging markets are also trading at 12 times forward earnings "and at a bigger than typical discount" compared to developed markets, statistics from JPMorgan showed. Among emerging markets, Dorson believes India offers the best long-term growth play and spotlighted Argentina's cheap valuation. Sovereign upgrades in countries like Greece and Brazil also helped to make them more attractive, he added. "We could be at the start of a new rotation," said Mohit Mirpuri, equity fund manager at SGMC Capital. "After years of U.S. outperformance, global investors are beginning to look elsewhere for diversification and long-term returns, and emerging markets are firmly back in the conversation," Mirpuri said. A weakening U.S. dollar — pressured by fiscal concerns and rising debt — has historically supported EM flows and FX stability, said a portfolio manager at VanEck, Ola El-Shawarby. But what could set the current optimism apart from previous emerging market rallies that fizzled out? "We've seen EM rallies before that ultimately lost steam, often because they were driven by short-term macro catalysts," said El-Shawarby. This current cycle could be different because of the combination of deeply discounted valuations, historically low investor positioning, and more durable structural progress across key markets, she said, citing India's long-term growth story anchored in domestic demand.
Yahoo
20-05-2025
- Business
- Yahoo
Wells Fargo says to buy U.S. stocks, avoid EMs
-- Wells Fargo told investors in a note Tuesday that it sees an opportune moment to cut exposure to emerging markets equities following recent outperformance, calling it 'an attractive opportunity' if investors are overallocated to the asset class. Despite a strong start to the year for the MSCI Emerging Markets Index, which gained 6.9% year to date compared to a 3.3% decline in the S&P 500 Index, Wells Fargo remains unconvinced. 'We are skeptical,' analysts wrote. 'The long-term EM equity track record has been uninspiring. EM earnings have barely budged since 2007, and index levels remain roughly 15% below their pre-global financial crisis highs.' The firm points to structural issues in emerging markets, including 'political and economic instability, corporate governance concerns, variable regulatory risks, as well as China's excessive debt, slumping property sector, and slowing growth.' While Wells Fargo acknowledges the rally was driven by 'modestly better-than-expected EM economic data prints, signs of bottoming consensus earnings expectations, China stimulus measures, and a broadly weaker U.S. dollar,' it warns that 'the EM sentiment pendulum has swung too far positive.' Trade tensions are another concern. 'In our view, trade frictions only add to the headwinds these markets will face,' the note said. Wells Fargo favors developed markets, noting that 'DM have the benefit of a more stable and predictable regulatory environment, while recent news of increased fiscal spending in Europe is likely to remain a tailwind to investor opinion and returns.' 'We favor reallocating to U.S. Large Cap, U.S. Mid Cap, or Developed Market (DM) ex-U.S. Equities to maintain overall equity exposure,' said Wells Fargo. For risk reduction, 'investors could look to Commodities or select fixed-income investments to reduce equity allocations.' Related articles Wells Fargo says to buy U.S. stocks, avoid EMs Morgan Stanley sees 'more risk than reward' for Asana, downgrades stock to sell 'Best of both worlds:' Wells Fargo starts SAP coverage at Buy
Yahoo
17-05-2025
- Business
- Yahoo
BofA's Hartnett Says EM Stocks Will Outperform Everything Else
(Bloomberg) -- Emerging-market stocks are 'the next bull market' as they benefit from a weaker dollar and an economic recovery in China, according to Bank of America Corp.'s Michael Hartnett. As Coastline Erodes, One California City Considers 'Retreat Now' How a Highway Became San Francisco's Newest Park Maryland's Credit Rating Gets Downgraded as Governor Blames Trump NYC Commuters Brace for Chaos as NJ Transit Strike Looms Power-Hungry Data Centers Are Warming Homes in the Nordics The MSCI Emerging Markets Index excluding China is up 20% from April lows and is set to break out of a 20-year trading range. The benchmark is up about 7% this year as investors seek alternatives to US assets, while S&P 500 is barely changed. 'Nothing will work better than emerging-market stocks,' Hartnett wrote in a note. US equities fell out of favor amid President Donald Trump's attempts to shake up global trade earlier this year. They've since recovered most of their losses and there are signs that investors are returning. Fund managers added $20 billion to US stock funds in the past week, the first inflow to the region in more than a month, according to EPFR Global data cited in the BofA note. Hartnett said he expects US shares to sell off again if the yield on 30-year Treasuries climbs above 5%, from around 4.87%. Still, he said the current yield level 'holds for now.' --With assistance from Michael Msika. Cartoon Network's Last Gasp Microsoft's CEO on How AI Will Remake Every Company, Including His DeepSeek's 'Tech Madman' Founder Is Threatening US Dominance in AI Race As Nuclear Power Makes a Comeback, South Korea Emerges a Winner Why Obesity Drugs Are Getting Cheaper — and Also More Expensive ©2025 Bloomberg L.P.
