A women walks past the Gateway of India in Colaba, Mumbai. (Photographer: Paul Hilton/Bloomberg News)

Top Hedge Fund Sees India As Safe Haven Amid A Global Slowdown

India will be viewed as a safe haven among its emerging market peers if the fears of recession hitting the larger developed economies come true, according to Andrew Holland, chief executive officer of Avendus Capital Alternate Strategies.

The fast moving consumer goods companies and private banks will lead the indices higher, said India's largest hedge fund which has a corpus of over Rs 7,000 crore.

Investment in the market will be led by large-cap stocks in the next few months as global uncertainties remain and India goes through its Lok Sabha elections in May, he said, adding that private capital expenditure will pick up in the second half of the year, which is when the focus will move towards mid-cap and small-cap stocks.

The world’s two largest economies—U.S. and China—are undergoing an economic slowdown, as per the key economic indicators, as they remain locked in a trade war. Simultaneously, the U.S. Federal Reserve has unrolled a plan to tighten its monetary policy, which will hurt corporate earnings in the U.S., Holland pointed out.

You could see a very quick slowdown, particularly if there is more prolonged negotiations on the trade front with China. Even if the trade deal gets done quickly, it doesn’t change things overnight
Andrew Holland, Chief Executive Officer, Avendus Capital Alternate Strategies

Also read: U.S. Recession Risk Hits Six-Year High Amid Trade War, Shutdown

The U.K.—which is set to see a vote on Theresa May’s Brexit deal today—is also undergoing an economic slowdown. Within this environment, India remains one of the fastest-growing major economies in the world.

Here are the other key highlights from the conversation:

  • Things are not looking great at all, globally.
  • U.S. is heading for a recession or is there already.
  • A Fed hike will hurt U.S. corporate earnings.
  • We are in for a growth shock.
  • India’s inflation data is within the RBI’s range.
  • RBI may go for a 25-50 basis point rate cut in next monetary policy.
  • Rate cut would give the economy an extra fillip before elections.
  • Expect India Inc. to see corporate earnings growth between 10-15 percent.
  • Changes in banking sector and management will lead the banking index higher.

Watch the full interview here

Also read: Emkay Global Expects Low Single-Digit Growth For India Inc. In Third Quarter