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Modi magic continues despite missing on promises: Jim O'Neill â10% growth possible if Modi or any other leader actively embraced structural reformsâ - Chairman, Goldman Sachs AM, tells Tanvir Gill of ET Now in an exclusive interview .Edited excerpts: The Indian equity market seems to be standing out from the rest of the emerging markets. What is your view?By and large, over the whole period of the BRIC story, Indian markets, and to some extent currency, have developed an identity. I certainly have looked at India, broadly speaking, in its own rights, as a specific and unique part of the BRIC story because India has never been so exposed to international trade as many other countries. A lot of people think the Indian equity market has got the so-called defensive properties because of Indiaâs economy being more resilient to global shocks. Particularly since Modi appeared on the scene 3.5 years ago, it gave a further premium to India because people believed and to some extent that belief has remained that India is embarking on a better structural path.Of course, you know way better than I do that Modiâs government has not really delivered in the way that many investors hoped but some of that belief about Modi is still there. The Indian equities, in particular, are treated a bit more independently than just being part of some emerging market mess. On the currency front, there is some evidence that appears to get caught up in what is going on with many other âso calledâ emerging markets which does not make a lot of sense to me. But it seems to trade that way. Does that mean that the EM risk correlation is broken down and if the region is hit by crisis, then India will be less impacted than others? It does yes but in that regard I would also emphasize a point that I touched on earlier, that in a very important contrast to the Asian crisis, the rupee to a large degree is a floating currency. For the rupee to decline albeit by 9% recently at a time when the dollar is rising against most currencies all over the world, should not be regarded as a particular sort of focus. What would be potentially more worrying for India is if there were some rigid fixed exchange rates. That might have encouraged excessive borrowing in dollars and at some point the Indian authorities would not have been able to support the pegged rate and there had to be some devaluation. If that had been the case, that would be much more worrying. The fact that the rupee has fallen when the dollar has seen a significant rise against the renminbi (RMB), according to me is not a big deal. If you have a declining rupee and a declining stock market and evidence of problems on the Indian bond market, then that would be a case for concerns but as you just described, collective performance of the Indian markets has been pretty relaxed about what is going on.Talking about India specifically, a large part of the investment attractiveness for India and especially Indiaâs growth story is supported by macros or stable politics. Do you agree?It is obviously a combination of each of those things. My own hunch is that Modi sort of retains a little bit of a magical factor which to some degree is not entirely justified but it is linked to the fact that India now regularly grows its GDP faster than China and that gives a degree of attraction as the strongest growing BRIC economy that otherwise would not be there. There is some constant awareness from investors that there is the potential of a significant micro reform. The never-ending discussion on foreign direct investment is always hanging over India and that makes people think that there is great potential out there. It is a combination of both but what is interesting is that a couple of reforms that Modi did undertake in the past two years -- the monetary reform and the tax reform -- were broadly regarded as not being done very well and appeared to have a big negative impact on Indian markets. That might be because as we got through time, maybe the initial perception of Modiâs policy change turned out to be too pessimistic and this is why it is important that the Indian macro economy continues to grow between 7% and 8%. The only way of really answering your question would be if we saw a period where India was growing by 10% or more, which I maintain in theory could happen if Modi or any other leader of the country decided to actively embrace structural reforms given the staggering demographics that India has.Another aspect to the story is how EMs are linked via respective currencies. What do you make of the currency weakness in emerging markets? The rupee has fallen nearly 10% from a year to date perspective but it has still more resilience given its domestic fundamentals. Do you feel that the weakness in the Indian rupee will be bought into and will give India its due strength?I remember another interview we did a couple of years ago where I said I considered the rupee was a great buy and within a couple of days, the rupee started rallying and my timing was very lucky. Yes, in this particular case, given the debate about what the Fed is going to do is a bit trickier, if for some reason, we saw signs that the inflation was unexpectedly accelerating in the US, the Fed would have to raise by more than the markets have priced in. In that case, you would see the rupee decline further, irrelevant of what was going on with Indiaâs deficit. Now, assuming that is not the case and given how the markets have reacted to the Fed chairmanâs speech in Jackson Hole, I liked the dovish reaction and very importantly, I do not believe there is any chance of a Trump administration achieving its goals if the dollar keeps rising. The rupee broadly speaking, is quite attractive from a valuation perspective, and I would guess six months from now the dollar is going to be weaker almost across the board against virtually every currency other than those with very bad fundamentals. I do not think the US can preside over a rising dollar given its economic policy ambitions. At some point, the dollarâs trend will change.
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- Copyright:(C)Mon 03 Sep 2018, 13:56:072018Mon 03 Sep 2018, 13:56:07 Bennett Coleman & Co. Ltd, http://info.indiatimes.com/terms/tou.html
- Here's the answer to the toughest problem MF investors faceCuriously, it is the more knowledgeable and more involved investors who face this particular problem.
- What RBI's first gold buy in 10 yrs could meanThis is significant because unlike many other central banks, RBI does not regularly trade in gold.
- Copyright:(C)Mon 03 Sep 2018, 13:53:352018Mon 03 Sep 2018, 13:53:35 Bennett Coleman & Co. Ltd, http://info.indiatimes.com/terms/tou.html
- MUMBAI: The Reserve Bank of India (RBI) has bought gold for the first time in nearly a decade, signalling that the metal could be in demand as a store of value when returns and capital values of fixed-income bonds are declining in a rising rate environment.The RBI added 8.46 metric tonnes of gold to its stock of holdings during the financial year 2017-18 that ended June 30, taking the level of gold reserves to 566.23 metric tonnes, according to its latest annual report.It last bought 200 metric tonnes from the IMF to boost its reserves in November 2009.Over the past nine years, the gold stock in RBI reserves was stable at 17.9 million troy ounce. But RBI has started adding to its stock since December 2017, data submitted to the IMF indicate.Stock of gold, as of June 30, amounted to 18.20 million troy ounce or equivalent to 566.23 metric tonnes, up from 17.9 million troy ounce in November, 2017.The RBIâs decision to buy gold is significant because unlike many other central banks such as the Peopleâs Bank of China, RBI does not regularly trade in gold, although the RBI Act permits it to do so.Economists reckon that investing in gold is a prudent treasury move by the central bank at a time of rising yields. RBI has already sold close to $10 billion worth US treasury securities between April and June, data with the US treasury department suggest.âThe addition of gold to RBIâs forex reserves is probably a diversification of assets for their deployment, keeping in mind both the build-up of reserves in 2017 as well as the evolving global risks, including market volatility and rising policy rates in the US,â said Saugata Bhattacharya, chief India economist at Axis Bank.Rising yields could trigger mark-tomarket losses for RBIâs bond portfolio. Of the $405 billion worth reserves with the central bank, $245 billion were held in the form of bonds and securities as of June 30, data submitted to the IMF show.Diversifying reserves to include gold is a prudent measure at such times. The Annual Report points out that RBI continued diversification of foreign currency assets with attention to risk management. The gold portfolio had also âbeen activated,â said Bhattacharya.The RBI did not say where it bought the gold from or the reasons for such transactions. But economists say that the central bank might also want to create a buffer to meet the redemption needs of Gold Bond Schemes through which it sold bonds worth more than ?4,000 crore.The RBI has to redeem the three- to eight-year bonds at the prevailing price of the metal and keep an extra stock of gold in its kitty to hedge against price risks.
- As part of its wide-ranging partnership discussion with US car maker Ford, Mahindra & Mahindra has started exploring potential of getting into markets of Indonesia, Russia and penetrate deeper into the South African market.Speaking on the side-lines ahead of the new vehicle Marazzo launch in Nashik, Pawan Goenka, MD of Mahindra & Mahindra said, "We are exploring various aspects with Ford - manufacturing, sourcing, engineering or even at retail front. But things are at a very initial stage to conclude what aspect we will be partnering."South East Asia is one of the key emerging market cluster where Mahindra does not have a presence and Ford may help maker of Scorpio to enter the critical markets of Indonesia or Thailand, likewise in Russia.However Mahindra has recently invested independently in its own facility in South Africa, despite Ford having a sizeable manufacturing facility. There Mahindra may look at using Fordâs distribution, sourcing or aftermarket support. It has been almost a year since, Mahindra & Mahindra and Ford Motor Co. announced a strategic alliance to explore cooperation on products, technologies and distribution including future mobility programmes, connected vehicle projects and electrification of cars among other areas. The current discussion marked a reunion of sorts after the two ended a joint venture in 2005.Mahindra & Mahindra has already helped Ford to penetrate into 20 tier II to tier III cities with its own dealer network set up to sell its vehicles with a different customer interface but a common service infrastructure.Already Mahindra's sourcing team is helping Ford Motor to source locally and bring down the cost which has already started helping the US car maker to bring down the cost. According to people in the know, Ford is of the opinion that Mahindra's cost structure is about 10-12% lower than Ford and already teams have started working on reducing cost.To be sure, apart from initiatives with Mahindra and measures taken internally, Ford has already reduced the cost by 37% in the last couple of years.On the products front, Ford is likely to offer its compact car platform B562 to Mahindra to use it for electric sedan and it is likely to use Mahindraâs new generation XUV platform W601 for a C segment SUV in the future.
- Balaji Telefilms Monday said it has appointed Aashish Singh as Chief Executive Officer (CEO) of its movie business."Aashish will have overall business responsibility for the movie business and will be reporting to Nachiket Pantvaidya, Group Chief Operating Officer," Balaji Telefilms said in a BSE filing."This appointment in line with Balaji Telefilms enhancing its organisation strength to drive enhanced success with its movie business," it added.Balaji Telefilms said it has a slate of movies it is now curating for the next few years, tailored to diverse audiences."The movie business follows a smart pre-sales and co-production strategy, enabling Balaji Telefilms to target better commercial values," it added.Shares of Balaji Telefilms were trading 1.74 per cent higher at Rs 111.35 apiece on BSE.
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