Christopher Wood of Jefferies in his latest GREED & fear note said his long-only India portfolio is up 41.2 per cent year-to-date in dollar terms on a total-return basis while the long-only China portfolio is down 12.1 per cent. It is still “All systems go” in India and that the contrast with China could not be more dramatic, he said on December 14.
"This is reflected in the equally contrasting performance of GREED & fear’s India and China long-only portfolios. The best performing stock in the Indian portfolio is up 309% year-to-date and the worst performing in China is down 55%," he said.
Wood said such contrasting performances would normally be a signal to go the other way in terms of buying China and selling India. But, he said, GREED & fear has no conviction for such a dramatic move, he said. "And nor does anyone else though a surge of China outperformance can happen at any time if there is a positive surprise on the policy front."
Taking about Asia, Wood said it is worth highlighting the strength of the latest Indian quarterly GDP data. He noted that India's real GDP rose 7.6 per cent YoY in the September quarter which was one percentage point above consensus.
The details of the report also confirmed that the Indian economy is now being driven by investment rather than consumption, thereby reversing the pattern of the past decade, Wood said.
Real private consumption rose 3.1 per cent YoY while real gross fixed capital formation (GFCF) was up 11 per cent YoY. Real GDP from the construction and manufacturing sectors was also up 13.3 per cent YoY and 13.9 per cent YoY, respectively, in the September quarter, he noted.
"Jefferies’ head of India research Mahesh Nandurkar also highlighted this week that the GFCF as a share of GDP has now risen by three percentage points from the low. The annualised GFCF to nominal GDP ratio has increased from 26.5 per cent in 4QCY20 to 29.4% in 3QCY23. Mahesh forecasts that the GFCF to nominal GDP ratio will rise to a near decade high of 30% in FY24, up from 27% in FY21. The 7.7% YoY real GDP growth in 1HFY24 has also caused the Reserve Bank of India to revise up its guidance for FY24 growth by 0.5ppt to 7.0% YoY," Wood noted.
Another interesting data point, Wood said, was the 12 per cent YoY growth in October in the index that measures the production of the eight core industries, such as energy, be it coal, natural gas or petroleum refining, or cement and steel. This is the second largest YoY increase since June 2022 after a 12.5 per cent YoY growth in August, Wood noted.
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