Investors and strategists have broadly welcomed Indian Prime Minister Narendra Modi’s announcement of a larger-than-expected stimulus package worth an estimated 10 per cent of gross domestic product.
The measures are impressive in their size, should boost investor confidence in India’s ability to deal with the economic impact of the coronavirus outbreak and provide support to the currency, according to early reaction from a number of market participants. Still, further details are required, especially on how the package will be financed, they said.
Equity futures on India’s NSE Nifty 50 Index traded in Singapore climbed in early trading Wednesday and dollar-rupee one-month non-deliverable forwards retreated.
Here’s what strategists and economists are saying about the new measures:
Samiran Chakraborty and Baqar Zaidi, India economists at Citigroup said: “The size of the package likely exceeds market expectations and the details will eagerly be awaited.”
“This is likely to necessitate both additional market borrowing as well as an immediate announcement of the Reserve Bank of India (RBI) support through large OMO and may be even direct monetisation if the combined power of fiscal and monetary stimulus has to be unleashed.”
“By explicitly referring to reforms in land, labour, agriculture, legal and administrative systems and infrastructure the PM has embarked on an ambitious reform agenda to make India more productive. Bolder structural reforms in the financial sector is also need of the hour.”
“While all these measures to boost domestic capacity is welcome, there could be a more explicit protectionist bent on the trade front in the near term as India shapes up to be more self-reliant.”
Gaurav Saroliya, director of macro strategy at Oxford Economics said “Alongside monetary easing by the RBI, we think this move, the details of which are still awaited, will boost market confidence that India will be able to limit the economic costs of the lockdown, which our macro team earlier estimated at around 6 per cent of annual GDP.”
“Indian equities and the rupee have underperformed during the sell-off in March as they tend to be a reflection of India’s domestic growth expectations. The fiscal boost has come at an opportune time for India as valuations are cheap both historically and relative to the Asia ex-Japan peer group.”
Qi Gao, a currency strategist at Scotiabank said: “US dollar and Indian rupee will likely trade between 74 and 77 in the coming weeks. A fiscal stimulus package itself could provide some support to the Indian rupee.”
Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore said: “Arguably, Indian PM Modi’s announcement of a 10 per cent of GDP (Dh976 billion / $266bn) COVID stimulus is a big deal compared to the earlier 0.8 per cent of GDP fiscal boost.”
“But with details awaited, it is unclear if this includes the already announced RBI credit/liquidity measures worth some 2.5 per cent of GDP. And so, the precise [quantum and dispersion] impact across sectors/industries remains to be seen, while the question of how it will be financed may prove to be a bugbear.”
Kaushik Das, India chief economist at Deutsche Bank said: “The 10 per cent of GDP economic package is inclusive of the various liquidity measures announced by RBI earlier and the previous fiscal package announced on 26 March (1.7tn rupees; 0.8 per cent of GDP); so we need to see what the incremental package size is excluding the support from earlier measures.”
Mahesh Nandurkar and Abhinav Sinha, equity analysts at Jefferies Financial Group said: “The headline no of the gross fiscal package of 20tn rupees / 10 per cent of GDP is impressive. This leaves a space of ~10tn rupees / 5 per cent of GDP for incremental announcements.”
if you go
ONCE UPON A TIME IN GAZA
Starring: Nader Abd Alhay, Majd Eid, Ramzi Maqdisi
Directors: Tarzan and Arab Nasser
Rating: 4.5/5
Classification of skills
A worker is categorised as skilled by the MOHRE based on nine levels given in the International Standard Classification of Occupations (ISCO) issued by the International Labour Organisation.
A skilled worker would be someone at a professional level (levels 1 – 5) which includes managers, professionals, technicians and associate professionals, clerical support workers, and service and sales workers.
The worker must also have an attested educational certificate higher than secondary or an equivalent certification, and earn a monthly salary of at least Dh4,000.
Champions parade (UAE timings)
7pm Gates open
8pm Deansgate stage showing starts
9pm Parade starts at Manchester Cathedral
9.45pm Parade ends at Peter Street
10pm City players on stage
11pm event ends
DAY%20ONE%20RESULT
%3Cp%3E%3Cbr%3E1.%20Charlotte%20Kool%20(NED)%20%E2%80%93%20Team%20DSM%3A%202hrs%2C%2047min%2C%2014sec%3Cbr%3E2.%20Lorena%20Wiebes%20(NED)%20%E2%80%93%20Team%20SD%20Worx%3A%20%2B4%20secs%3Cbr%3E3.%20Chiara%20Consonni%20(ITA)%20%E2%80%93%20UAE%20Team%20ADQ%3A%20%2B5%20secs%3C%2Fp%3E%0A
Neil Thomson – THE BIO
Family: I am happily married to my wife Liz and we have two children together.
Favourite music: Rock music. I started at a young age due to my father’s influence. He played in an Indian rock band The Flintstones who were once asked by Apple Records to fly over to England to perform there.
Favourite book: I constantly find myself reading The Bible.
Favourite film: The Greatest Showman.
Favourite holiday destination: I love visiting Melbourne as I have family there and it’s a wonderful place. New York at Christmas is also magical.
Favourite food: I went to boarding school so I like any cuisine really.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
