JP Morgan analyst Bharat Iyer made the news this morning with his scintillating call on the Indian Equity market. According to Bloomberg, Bharat’s stance is that after there is confirmation that the slump in industrial production has ended, the market should bottom over the successive 2 to 4 months: “The above analysis would suggest that the equity markets could bottom out over June to July. This would also be a decisive phase for the equity markets as there should be clarity by then on the results of the national elections and the progress of the monsoon and its seasonal impact on the economy.”
So Bharat, you are saying that if we get confirmation that industrial output has bottomed, and a new government has been selected, and we know what the impact of the monsoon on the agricultural sector is that then, we may subsequently conclude that the equity market has bottomed? Thanks man. That is truly amazing insight. I bet that you also tell investors that if they take a walk outside and get wet that it probably indicates a strong likelihood of rain.
All joking aside, Bharat Iyer is correct, the Indian equity market will find a bottom at some point after a lot of unknown factors that we grapple with currently become known. Part of our process is managing risk and we will always be on the lookout for signals that the economic cycle is starting to turn. For now however, with the data we have available, we continue to expect more declines for Indian equities.
We are short the Indian equity market via IFN, and continue to see the economy there as the most structurally flawed of the major Asian nations.