In a note to clients earlier this week, Pratik Gupta, strategist at Deutsche Bank AG, predicted that shares in domestic-driven economies such as India would be in demand in the coming year. ''Given U.S.-related risks, we see domestic consumption and infrastructure plays attracting even more money,'' the note stated.
It also predicted that the Sensex would touch 18,000 by September 2008. The note recommended that investors hold more shares of cement producers, capital-goods manufacturers, financial-services providers and automakers than benchmarks suggest. ''While India's linkages to the global economy have increased more rapidly in the last few years, it is still a lot less linked than most other major economies and hence is less vulnerable to any sharp US-led global slowdown,'' the note stated.
Meanwhile, the economic analysis arm of Moody's, the international rating agency, has said that the Reserve Bank of India's (RBI) tight monetary policy is likely to moderate the growth rate of the Indian economy in the second half of the current financial year. Although India is expected to maintain a strong growth momentum, it will not match the 9% expansion witnessed in recent year. However, the report did say that strong construction and infrastructure spending would partially offset the expected slowdown in consumer demand.
Jim Walker, CLSA Asia Pacific Markets chief economist, feels that the current US sub-prime mortgage crisis is “probably the biggest crisis the global financial market has seen since the Great Depression”. He cities China as being the most vulnerable economy in the world since “no other country has benefited more from demand in the US and global central bank profligacy than China, and the problem is that we don't know how distorted the industrial structure has become as a result”. He says that India is a safer haven for investors as the domestic demand story is real and result-oriented and the RBI has been very aggressive in its monetary policy. The biggest risk for India is “the need for money to maintain its strong growth and credit will become more expensive or less available”.
The information is compiled from reports that appeared in the media this week.
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