Finance Minister Nirmala Sitharaman focused on growth, sustainability and capex, that’s the verdict coming in from the Street. Jefferies’ Global Head of Equity Strategy Christopher Wood concurs.
He believes the government has delivered a pro-growth Budget, which focused on infrastructure capex. But while the Street is concerned about the less-than-expected easing in fiscal deficit target, Wood remains unfazed, says as long as the government is spending in the right areas and boosting investments, fiscal deficit is nothing to be concerned about.
He is also not concerned about inflation, which according to Wood, reflects monetary and fiscal stimulus.
“The inflation issue we have right now in the world is primarily centred on the G7 economies. In the US, UK, EU, it reflects the huge monetary and fiscal stimulus in response to the pandemic. Demand was artificially stimulated because people were paid money to do nothing. In Asia, governments have not done that, be that in China or India or South East Asia. So the inflationary pressures are much less,” Wood said.
The global markets expert remains constructive on the India growth story, especially because the current administration has implemented several major reforms over the past five years. He expects the reforms push to continue.
Even if the central bank hikes rates, India’s growth will continue, Wood said. “The housing cycle has picked up significantly. The government’s infra push will bring in more private investments,” he added.
Even though he has not reduced his India weightage, he believes the market is vulnerable in the short term due to global developments. “Corrections in India are caused by externalities,” he noted, but added that every correction in the country is a buying opportunity.
However, he flagged two major risks for the country – US Fed rate hikes and rising crude oil prices. This, he believes, will also continue to pressure US technology stocks.
“If the Fed proceeds with the stated policy to combat inflation, tech stocks will remain at risk. We have seen in the past two months, the most dramatic u-turn by a central bank I have ever witnessed,” Wood explained. “In my view, the markets are more concerned about the balance sheet contraction than the rate hikes,” he added.
