Venugopal Garre, Managing Director at Bernstein, conveyed that India’s macroeconomic conditions had bottomed out earlier in the year, as he suggested in January. He noted that there have been ongoing improvements in these conditions. In a discussion about India’s economic outlook following a 50 basis points rate cut by the Reserve Bank of India (RBI) amid global uncertainties, Garre highlighted his positive outlook on the Indian market, specifically targeting a Nifty index level of 26,500.
Earlier in the year, Garre anticipated further rate cuts. With global uncertainties potentially facilitating more rate reductions and regulatory measures easing liquidity in the banking system, he sees a favorable environment for India’s economic landscape this year and into the next. Additionally, he emphasized that both capital expenditure and consumption are expected to improve compared to the previous year, although he cautions against expecting returns of 25% to 30%.
On the topic of currency risk, Garre discussed the complexities of predicting currency movements. He posited that the U.S. dollar index had likely peaked at the beginning of the year and anticipated its moderation over time, which could allow India to cut rates without significant concern over currency depreciation. However, he acknowledged that continued trade tensions between the U.S. and China could impact global trade, with potential implications for emerging market currencies, including the Indian rupee.
Addressing his portfolio strategies amid these volatile economic conditions, Garre emphasized the challenge of constructing portfolios in such an environment. He aimed to capture stock recovery opportunities while maintaining a degree of defensiveness to avoid losses. His sector strategy included overweight positions in domestic sectors like financials, telecom, and utilities, and adjusting weights in global sectors like healthcare and IT services. Over the past four months, his India portfolio, which included stocks such as Bharti Airtel, Adani Ports, and Avenue Supermarts, focused on bottom-up stock selection and recovery candidates, with some adjustments based on performance and market conditions.
